VZCZCXRO1739
PP RUEHCN RUEHGH
DE RUEHBJ #0442/01 0550945
ZNR UUUUU ZZH
P 240945Z FEB 10
FM AMEMBASSY BEIJING
TO RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 8228
INFO RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS SECTION 01 OF 02 BEIJING 000442 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR 
 
E.O. 12958: N/A 
TAGS: EINV CH
SUBJECT: AMCHAM SURVEY: COMPANIES STILL OPTIMISTIC ABOUT 
CHINA 
 
SENSITIVE BUT UNCLASSIFIED -- BUSINESS PROPRIETARY 
NOT FOR INTERNET DISTRIBUTION -- PLEASE PROTECT ACCORDINGLY. 
 
¶1. (SBU) Summary: The American Chamber of Commerce in China 
(AmCham) on February 10 briefed members on the results of its 
soon-to-be released 2010 Business Climate Survey.  Companies 
said they were generally optimistic about the Chinese market, 
with firms that had been operating in China longer more 
likely to report being profitable here.  Respondents most 
frequently listed "inconsistent regulatory interpretation" as 
one of their companies' top concerns in China.  Almost 
two-thirds of respondents said China's enforcement of 
intellectual property rights (IPR) was ineffective, while 60 
percent said Internet censorship did not affect their 
companies' ability to conduct business normally in China. 
End summary. 
 
2 (SBU) AmCham's Public Policy Development Committee on 
February 10 previewed for its members the results of its 2010 
Business Climate Survey, due to be released publicly in 
March.  AmCham conducted the survey in November/December 2009 
(i.e., before Google's announcement that it was considering 
withdrawing from the Chinese market.)  The survey was open to 
AmCham's 1200 corporate members, of which 388 responded. 
 
BUSINESS ENVIRONMENT 
-------------------- 
 
¶3. (SBU) Asked to rank their top five business challenges in 
China, respondents most frequently cited "inconsistent 
regulatory interpretation," "management-level human resources 
constraints," and "obtaining required licenses," followed by 
a three-way-tie between "national protectionism," 
"bureaucracy," and "unclear regulations."  (In AmCham's 2009 
survey, "management-level human resources constraints" topped 
the list, followed by "inconsistent regulatory 
interpretation," "bureaucracy," "unclear regulations," and 
"lack of transparency.")  Twenty-six percent of respondents 
said they viewed foreign companies as "increasingly 
unwelcome" to participate in the Chinese market compared to 
one year ago, 30 percent viewed foreign companies as "more 
welcome," and the remaining 44 percent saw "only minor change 
from 2008." 
 
THE CHINESE MARKET 
------------------ 
 
¶4. (SBU) Sixty percent of respondents said their companies' 
primary goals and strategies in China were to "produce or 
source goods or services in China for the China market."  A 
larger number of respondents this year said competition from 
Chinese firms had "increased" or "increased slightly" than 
did a year ago.  Eighty percent of respondents said their 
companies planned to increase investment in China operations 
for 2010, but few planned to expand beyond current locations 
into second- and third-tier cities. 
 
REVENUE AND PROFITABILITY 
------------------------- 
 
¶5. (SBU) Twenty-eight percent of respondents said China 
ranked as the number one priority for their companies' 
near-term global investment plans, with an additional 47 
percent placing China as one of their top-three priorities. 
Although companies reported their financial performance in 
China in 2009 as slightly less profitable than in 2008, a 
larger percentage of respondents were "more optimistic" about 
their one-year business outlook in China than a year before, 
and more respondents rated as "optimistic" their five-year 
business outlook in China than did one year ago. 
 
¶6. (SBU) Respondents said their 2009 operating margins were 
slightly higher than the company's worldwide operating 
margins.  Companies that had had a physical presence in China 
longer were more likely to report their financial performance 
in China as "profitable" or "very profitable." 
 
RISKS AND HOT-BUTTON ISSUES 
--------------------------- 
 
¶7. (SBU) Respondents most frequently cited "Chinese economic 
slowdown," "global economic slowdown," and "labor costs" and 
"global financial market instability" (tied) as the top three 
risks facing their China operations.  Approximately 63 
percent of respondents said China's enforcement of 
intellectual property rights was either "ineffective" or 
"totally ineffective," while the remaining 26 percent said 
 
BEIJING 00000442  002 OF 002 
 
 
enforcement was either "effective" or "very effective." 
Approximately 60 percent of respondents said Internet 
censorship did not impact their companies' ability to conduct 
business normally in China, 32 percent said there was a 
"somewhat negative" impact from Internet censorship, and 
eight percent said there was a "severe negative impact." 
 
MESSAGING 
--------- 
 
¶8. (SBU) Hart offered little analysis of the survey data.  He 
said AmCham would, over the next few weeks, formulate a 
message to deliver to the PRC, the USG, and local and foreign 
media upon the survey's release. 
HUNTSMAN