The growing challenges of doing business in China

Despite China’s stellar GDP which will total $8.9 trillion this year, rising 98 percent from five years ago (according to the IMF), growing scrutiny of overseas firms by regulators and state media as well as a  jump in labor costs may diminish the lure of investments in China. Complaints cited by foreign companies range from anti-monopoly concerns to copyright infringement, import bans, higher taxes, accusations of corruption and attacks in state media.

Jaguar Land Rover and Audi AG became the latest targets when state media accused them of charging “unfair” prices for spare parts. The automakers joined foreign companies from Starbucks Corp. to Burberry, Qualcomm Inc. and Apple Inc. in the roll of those with deepening challenges in China even as the year-old leadership team headed by President Xi Jinping seeks to elevate the private sector.

A survey released in October by the Washington-based US-China Business Council showed fewer U.S. businesses rank China as their top priority, citing issues such as rising costs, competition with Chinese companies and challenges with licensing and business-approval processes.

The record 49 percent rise in wages in the past three years is posing yet another major challenge for foreign companies operating in China. The European Union Chamber of Commerce in China estimates that its more than 1,700 members in China lost at least 17.5 billion euros ($24 billion) last year in potential revenue because of market-access barriers such as uneven regulatory treatment, a failure to enforce intellectual property rights and burdensome regulatory reporting requirements.

Apple is among those willing to take on the challenges. The Cupertino, California-based company struck a deal with China Mobile Ltd., the world’s biggest mobile phone carrier, to sell the iPhone in China after six years of negotiations. China Mobile will sell the two newest iPhone models in its retail stores starting Jan. 17, according to a joint statement Dec. 22.

Luxury-goods maker Burberry is also battling in China to get the protection for its trademark checked pattern it’s accorded in markets from Japan to the U.S. The London-based company said Nov. 28 it is appealing a decision by regulators to restrict its trademark for leather goods. Several other major international luxury brands face trademark infringements in China, with entire shopping centers created of counterfeit branded stores.

adapted from Bloomberg