China - Country Commercial Guide
Market Challenges
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The PRC remains a challenging place to do business, further complicated by the PRC’s handling of the COVID-19 worldwide pandemic. The American Chamber of Commerce (AmCham) China’s 2022 American Business in China White Paper laid this out in four key themes:

  • Ongoing COVID-19 prevention measures have decreased predictability and increased the costs of PRC operations
  • A lack of regulatory clarity has undermined business confidence in many sectors
  • Government-led emphasis on self-reliance is creating additional uncertainty for foreign businesses
  • Members remain committed to the PRC market, but many longstanding business challenges remain

Firms seeking to export to the PRC face various headwinds, including fragmented and inconsistently implemented local regulatory requirements, the preferred treatment for local competitors, and the need to localize products and services to meet local consumers’ expectations and requirements, among others.

Despite PRC government efforts to streamline bureaucracy and reduce red tape, foreign companies continue to complain about lengthy and opaque administrative procedures, especially with respect to permits, registration, and licensing. Furthermore, foreign enterprises continue to report that PRC government officials may condition approvals on a foreign enterprise’s agreement to transfer technology, conduct research and development in the PRC, satisfy performance requirements relating to exportation or the use of local content, or make valuable, deal-specific commercial concessions.

The focus on self-reliance has contributed to the PRC’s continued pursuit of industrial policies that limit market access for imported goods, foreign manufacturers, and foreign services providers while offering substantial government guidance, resources, and regulatory support to local industries. The principal beneficiaries of these policies are state-owned enterprises as well as other favored domestic companies. Provincial and local governments can have an ownership stake in private companies, incentivizing support of these enterprises.

In recent years, the PRC’s cyber security, data security and personal information protection regulations have posed new challenges for industry. For example, local data storage requirements have added extra operating cost, and strict requirements for cross-border data transfer are significant and costly barriers for companies doing business in the PRC.  This is not only impacting the technology sector, but also almost all the sectors that build on the use of data: e-commerce, logistics, connected vehicles, smart healthcare, etc.

Intellectual property (IP) infringement is widespread in the PRC. It is incumbent upon U.S. firms to take proactive steps to protect and enforce their IP rights. Please see the Protecting Intellectual Property section for more information.

Market conditions also create persisting challenges, with rising labor costs among American firms’ top concerns about the PRC market. Increasingly competent domestic challengers and industrial overcapacity in some segments are also frequently cited challenges.

In addition to these longstanding challenges, American companies report regulatory compliance risks, including insufficient time to comply with new regulations, as a growing challenge. 

Tensions in the U.S.-PRC bilateral relationship have become a greater concern for American firms, reportedly making it more difficult for companies to conduct business, both due to specific measures taken by the PRC that increase the compliance burden for firms and increased operational uncertainty that arises from bilateral tensions.  Specifically, U.S. companies report local customers questioning whether American firms can be relied upon over the long term, dampening U.S. firms’ competitiveness vis-à-vis local and third market businesses.