Lack of IPR enforcement key concern

The combination of deteriorating IPR enforcement, domestic protectionism and human resource constraints are restricting the opportunities for foreign companies seeking to compete fairly in China, a key business survey revealed Thursday.

The annual China business report, released Thursday by the American Chamber of Commerce in Shanghai, surveyed 346 American companies operating in China and highlights lingering concerns over issues such as bureaucracy and unclear regulations.

According to this year's survey, 71 percent of respondents feel enforcement of intellectual property rights "stayed the same" or "deteriorated," up from 61 percent in 2009 and 64 percent in 2008. IPR remains a top concern because US companies perceive a lack of protection and enforcement for intellectual property rights to be a blow to their competitive advantage and is costing US companies billions of dollars.

Just last week, Commerce Minister Chen Deming admitted enforcement of copyright laws could improve, but added "China's firm determination to protect intellectual property rights is unquestionable and unshakeable."

Slim pickings in China's vast talent pool were highlighted by survey results that show US companies found it more difficult to attract managers, executives, technical staff and other skilled workers in 2010 than in 2009.

While frustrations abound, for some companies those headaches are offset by rising profits. The AmCham report also said that the percentage of US companies reporting revenue growth surged to 87 percent last year, up from 47 percent in 2009 and 77 percent in 2008.

Meanwhile, 79 percent of the companies surveyed said that they are "very profitable" or "profitable," and 61 percent of the respondents said they gained market share for their China products or services, all considerably higher than the same figures for the previous two years.

"In 2010, not only have US companies in China recovered, they are reporting all-time performance highs," the report said.

A majority of US and European companies are optimistic about the Chinese market, and an increasing number of them have made their China-based business a priority after growth in their respective domestic markets slowed down, the AmCham survey and a similar business confidence survey by the EU Chamber of Commerce in China last year showed.

Meanwhile, nearly 80 percent of companies agree that China's regulatory environment is not transparent, though China has demonstrated an increased commitment to transparency.

Responding to concerns about regulatory transparency and IPR protection raised by the AmCham poll, Cao Haihong, a deputy director with the China Association of Enterprises with Foreign Investment under the Ministry of Commerce, encouraged the companies to make suggestions to policymakers of the upcoming 12th Five-Year (2011-2015) Plan, which could offer opportunities for the foreign enterprises in many new areas, including green energy, financial services and logistics.

In addition, China's government procurement rules and "indigenous innovation" policies, which promote bringing to market homegrown technologies, may restrict opportunities for foreign companies from competing fairly in China's growing procurement market valued at $88 billion.

Other challenges for the foreign community trying to do business in China come from the tax administration, difficulties in enforcing contracts, corruption and navigating through the nation's bureaucratic system where different agencies do not always play by the same rules.