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2009 "White Paper" on the Business Environment in China

English version of 2009 "White Paper" on the Business Environment in China: Download

Please note: 1. Since the whole document is quite large, the English part is separated from the Chinese;

2. The pagination of the PDF edition is the same as the hard-copy.

3. To download the Chinese version, please click: 中文版

AmCham South China: Goals described by NPC, CPPCC completely consistent with U.S. companies’ objectives in China

2009 “White Paper” investigates effects of crisis, suggests how companies and governments can work together to speed economic recovery

GUANGZHOU, People’s Republic of China – March 9, 2009 – The American Chamber of Commerce in South China (AmCham South China) today released its 2009 “White Paper” on the Business Environment in China, expanding on themes discussed in its 2009 Special Report, which was released last Tuesday.

“After completing the White Paper, we have been pleased to find that the key themes and considerations we have emphasized as being of importance to U.S. companies are completely consistent with the NPC and CPPCC’s agenda as has been articulated in Beijing this past week,” said AmCham South China president Harley Seyedin.

The White Paper offers a summary of China’s impressive accomplishments since ‘opening up’ and examines the key influences on the business environment in present-day China, such as national policy initiatives and the global economic crisis.

The White Paper puts forward four suggestions to the governments of the United States and China: avoid protectionism; maintain and use already-successful platforms for dialogue such as the SED and JCCT; take advantage of the crisis to examine fundamental assumptions about how our economies should work together; and, in China, consider temporary adjustments to incentive policies for both Chinese and foreign companies as the recovery progresses and to attract more foreign direct investment (FDI).

Additionally, the White Paper urges AmCham South China member companies to themselves take part in the economy’s recovery, recommending hiring additional employees at the present time to create up to 50,000 new jobs and develop talent; researching and developing China-specific products to encourage domestic consumption; making strategic investments to prepare for expansion as the market recovers; and “future-proofing” their operations to ensure that they not only meet—but exceed—current environmental and efficiency standards.

“These are definitely steps that we as companies can take, and that in our opinion should take, to play our role in the economic recovery of both China and the world,” said Mr. Seyedin.

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Background: About the suggestions presented in the 2009 “White Paper”

1. [To the U.S. and China] Avoid Protectionism: AmCham South China’s interpretation of the effects of the Smoot-Hawley Tariff Act (1930) is that it was primarily successful at protecting Americans from the benefits of global trade. It seems to be generally accepted that this act did not help recovery from the Great Depression, and likely made things worse. We propose that while the intent of protectionist policies may be helpful, the net effect—especially in an economic environment that is more globalized now than it has been in the past—will very likely be negative.

2. [To the U.S. and China] Utilize existing and appropriate venues for direct and respectful discussion: The Strategic Economic Dialogue (SED) and the Joint Commission on Commerce and Trade (JCCT) have both been, by the accounts of both the Chinese and the United States governments, successful and positive efforts. We propose that these, or similar, venues will continue to benefit both parties and their constituents.

3. [To the U.S. and China] Now is an opportunity for making systemic adjustments: The existence of this global economic crisis suggests to us that the system under which we have conducted economics is not perfect. We propose that being open to new ideas, in addition to relying on our widely-held current assumptions about how economies work, will in the end only enrich our understanding and hopefully lead to—at the very least—evolutionarily stronger ways of thinking about economies.

4. [To China] Consider reformulating specific programs and incentives: Companies under cash-flow strain are less likely to be able to invest and employ in China. There are proven methods for driving investments that have been used in the past 30 years to great success, in addition to more recent programs. We propose that reinstating or adjusting some of these programs can have the effect of both immediately stimulating the economy and also staying true to China’s long-term development goals.

For example, the “High and New Technology Enterprise” program could be temporarily adjusted to do its job of promoting high-tech growth while also easing the burden of existing employers in China:

· A finite grace period for Intellectual Property (IP) criteria to include foreign-registered IP—we suggest 5 years—would increase perceived competitiveness for incoming foreign direct investment (FDI) in this professedly desirable sector

· Temporarily reducing the criteria for percentage of employed staff doing engineering and research and development—we suggest a reduction from 30% to 10%—would make more companies already engaged in this sector eligible for the program, providing support to a larger number of companies employing university graduates

5. [To AmCham South China members] “2-year plan for aiding economic recovery”: We urge our members, and companies of every nationality, to view this downturn not as a setback, but as an opportunity—a springboard—for positioning themselves for future growth when China’s economy inevitably recovers. This project is, in our opinion, not only positive for companies, but is also consistent with what governments have already identified as key strategies for overcoming the current slowdown:

1. Hire today to be fully staffed for tomorrow’s demand, bringing on between 10 and 50 new employees each in order to take advantage of the relative surplus of qualifiable talent currently on the market

2. Research and develop China-specific products that will be more desirable for a greater percentage of China’s population

3. Make strategic investments aimed at laying the groundwork for growth when the economy recovers

4. “Future-proof” operations by upgrading to exceed current environmental and energy-efficiency standards

If roughly 60% of AmCham South China members subscribe to this project, we estimate that between 10,000 and 50,000 new jobs will be created in South China, in addition to many other less immediately tangible benefits, such as smaller environmental footprints, and support for the Chinese government’s program to increase domestic consumption.

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