Shanghai has long been a fixture on the FDI radar screen. But while doing business in China never has been easy, members of the American Chamber of Commerce in Shanghai are finding that negative signals from Chinese officials are increasing anxiety about investing there.  

Protectionist policies, unclear regulatory requirements and a growing sense that foreign companies are unwelcome are preventing some US companies from expanding in China, say AmCham Shanghai representatives. Particularly problematic at the moment are bans on American food products such as beef and rice, and policies related to food safety, financial services and cyber security.

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However, AmCham Shanghai president Kenneth Jarrett reported during his annual 'door knock' in Washington, DC, in September that many US companies remain optimistic about FDI opportunities. “The story is different from one industry to another,” he said. “But most companies still are profitable there and enjoy healthy market share.”

China is still transitioning from a manufacturing economy to one that embraces the service sector. “The rise of China’s middle class is resulting in US companies focusing on distribution, ecommerce, supply chain management and branding across the Chinese landscape,” said AmCham Shanghai chairman and ChinaVest CEO Robert Theleen. “The Chinese middle class wants to buy products that are better quality and better for their families. Here is where American and European companies succeed.” 

Ecommerce in particular offers great opportunities. According to research firm Forrester, China’s ecommerce market was worth $440bn in 2014 and is expected to grow at a compounded annual rate of 20% before surpassing $1000bn in 2019. Even more staggering, analyst McKinsey estimates that by 2020, China’s ecommerce market will be larger than those of the US, UK, Japan, Germany and France combined.

According to Mr Theleen, however, the real problems for US ecommerce companies in China are legal restrictions and slow or blocked access to their online stores. “We don’t see Armageddon happening,” he said. “We think there is a branding and economic story that is important to mention.”

He also stressed that China is the first continental economy to take off in Asia. “All other economies are those of island nations, city states or peninsulas,” he said. “More so, China is going through a transition between benefiting the producer to benefiting the consumer. It’s messy, but it will strengthen China’s middle class.”