The document summarizes key findings from the 2013-2014 China Business Report by AmCham Shanghai. It finds that China's economy is increasingly oriented toward services, accounting for over half of U.S. company revenue. While growth remains strong, costs and regulatory challenges like bureaucracy continue to hinder business. Amid a more competitive environment, companies are focusing on strengthening operations, better understanding customers, and integrating China into global strategies.

1. China Business Report
2013-14!
Highlights
By
AmCham
Shanghai
上海美国商会2013-­‐2014年度中国商业报告
50+ YEARS OF EXPERIENCE & KNOWHOW IN CHINA BUSINESS

2. Exec. Summary
! Heading
Towards
a
Service
Economy
! In
2013,
the
experiences
and
ac4vi4es
of
U.S.
companies
in
China
are
more
than
ever
resembling
developed
markets.
More
companies
are
involved
in
the
service
sector,
and
there
is
a
con4nuing
shiC
from
the
pursuit
of
manufacturing
for
export,
towards
producing
and
distribu4ng
goods
for
the
domes4c
market,
as
well
as
rapid
growth
of
the
services
sector.
! In
2013,
services
accounted
for
more
than
half
(52
%)
of
U.S.
companies’
revenue
–
an
11
point
jump
from
the
year
before.
The
growing
importance
of
services
to
the
boNom
line
is
in
contrast
to
manufacturing,
which
dropped
10
percentage
points
in
2013
to
make
up
only
37
%
of
companies’
revenue
! Shanghai
Data
(by
the
Shanghai
Sta4s4cs
Bureau)
! Economy
+7.7%,
service
sector
+9.1%,
manufacturing
sector
+5.3%
in
Q1-­‐3
/
2013
! Services
61.6%
of
the
Shanghai
economy
in
Q1-­‐3
/
2013
(60.4%
in
2012)
! Manufacturing
accounted
for
38.0
%
in
Q1-­‐3
/
2013
(39.0%
in
2012,
41.4%
in
2011)
! =>
Shanghai
increasingly
shiCs
to
higher
value-­‐added
ac4vi4es

3. Exec. Summary
! Financial
performance
! Surveyed
companies
(N=399)
recorded
excellent
top-­‐line
performance
indicators
in
2013.
Among
respondents,
! 67%
reported
revenue
growth
over
the
previous
year,
and
! 74%
of
companies
said
their
China
opera4ons
were
profitable.
! Three
out
of
four
companies
(75
%)
reported
a
posi4ve
cash
flow
in
their
China
opera4ons,
up
3
percentage
points
! U.S.
companies
remain
commiNed
to
the
China
market,
with
86%
of
companies
repor4ng
an
“op4mis4c”
or
“slightly
op4mis4c”
outlook
for
their
5-­‐year
business
prospects
in
China.
! However,
the
shape
of
business
growth
and
expecta4ons
of
leadership
con4nue
to
evolve

4. Exec. Summary
! Common
trends
! In
China
for
China
–
con4nuing
a
trend
from
previous
years,
59%
of
companies
say
they
primarily
are
in
China
to
compete
in
the
growing
domes4c
market
! Growth
is
slowing,
but
profitability
is
spreading
–
although
profit
margins
were
roughly
flat
compared
to
the
previous
year,
more
companies
(74%)
said
they
were
profitable
in
2013
than
in
previous
surveys
! Increasing
compe;;on
–
strong
compe44on
from
Chinese
and
interna4onal
players
reflect
an
increasingly
compe44ve
China
market
! Greater
opportuni;es
in
services
and
for
SMEs
–
U.S.
companies,
including
a
growing
number
of
SMEs,
are
tapping
into
a
fast
developing
services
economy
These
trends
represent
economic
reform
being
implemented
across
the
country
and
the
leading
role
Shanghai-­‐based
companies
are
playing
in
responding
to
and
par4cipa4ng
in
these
trends.

5. Exec. Summary
! Persistent
Business
and
Regulatory
Challenges
! Rising
costs
–
for
the
third
consecu4ve
year,
rising
costs
remained
the
top
business
challenge,
with
89%
of
companies
responding
that
a
number
of
increasing
costs
in
China
hinders
their
business.
! Human
resource
constraints
and
Local
compe;;on
ranked
No.
2
and
No.
3,
respec4vely
Similarly,
top
legal
and
regulatory
challenges
in
2013
remained
unchanged
from
those
over
the
past
three
years.
Generally
consistent
with
previous
years,
! 80%
of
respondents
cited
bureaucracy
as
the
No.
1
challenge,
with
! 72
%
declaring
difficul4es
from
an
unclear
regulatory
environment
and
! 70
%
were
concerned
over
problems
with
tax
administra;on

6. Exec. Summary
! Key
responses
An
analysis
of
the
issues
raised
by
U.S.
companies
responding
to
the
survey
indicates
that
companies
in
China
are
focusing
on
three
key
ini4a4ves:,
! Strengthening
the
core
–
Companies
are
focusing
on
key
opera4onal
issues
to
make
opera4ons
more
efficient
and
compliant
to
provide
a
plagorm
for
further
investment
and
growth;
! Knowing
the
customer
–
As
baseline
market
growth
slows,
companies
are
finding
crea4ve
ways
to
change
their
growth
strategies,
stay
ahead
of
the
compe44on
and
increase
market
share;
and
! Integra;on
–
As
global
markets
improve,
companies
are
relying
less
on
rapid
growth
in
China
to
support
global
performance
and
are
instead
looking
for
ways
to
integrate
China
further
into
their
global
opera4ons
and
focus
on
China
as
a
unique
and
dis4nct
business
opera4on.
Together,
these
ini4a4ves
form
a
cohesive
response
by
U.S.
companies
to
an
ongoing
transi4onal
phase
in
the
business
environment
in
China
–
one
led
less
by
export-­‐
and
investment-­‐led
growth
to
one
sustained
by
consump4on
and
services.

7. Business Performance by Industry

8. Business Performance by Sector

9. Business Challenges by Industry & Sector

10. Regulatory Challenges by Industry & Sector

11. Analysis
! By
Beijing
based
IP/IT
lawyer,
law
professor
Stan
Abrams
! No
one
will
be
surprised
by
most
of
the
trends
highlighted
by
the
survey:
higher
costs,
lower
revenue,
cauNous
aOtudes
about
economic
slowdown
and
government
reform;
! However,
it’s
probably
worth
to
take
a
close
look
on
the
labor
issues:
higher
compensaNon
is
an
old
story,
but
I
was
surprised
just
how
difficult
it
is
these
days
for
companies
to
find
qualified
staff.
#1
problem
for
many
companies!
! Majority
of
respondents
say
that
IP
enforcement
is
either
ineffecNve
or
totally
ineffecNve.
Given
that
the
highest
response
type
back
in
2010
was
“Don’t
Know,”
I
find
it
difficult
to
ascertain
what
people
actually
understand
about
this
issue.
A
clear
majority
also
say
that
IP
enforcement
has
improved
or
stayed
the
same
in
the
last
five
years.
So
the
bar
was
so
low
five
years
ago
that
even
with
improvement,
the
system
is
sNll
completely
useless?
There
is
a
clear
trend
here
of
a
rising
sense
that
the
system
is
ineffecNve.
This
has
risen
from
33%
of
respondents
in
2009
to
54%
this
year,
dropping
slightly
from
a
high
of
58%
in
2013
(the
“totally
ineffecNve”
numbers
have
risen
as
well).
That
would
be
ueerly
depressing
-­‐
has
the
system
deteriorated
significantly
over
the
past
few
years?
I
have
to
wonder
whether
there
is
a
percepNon/reality
gap
here.
See
more:
hNp://4nyurl.com/pxnqnl6

12. 谢谢THANK YOU !
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