1. www.amchamchina.org AmCham China 2013 American Business in China White Paper

2. About the White Paper Represents the views of: Over 1,000 companies Over 3,500 individual members Process: Working groups find consensus on key issues Volunteer members with expertise draft initial content AmCham China’s Policy Committee and staff edit and coordinate Approval by Board of Governors

3. About the White Paper Chapter composition Business climate overview Industrial policy and market access Cross-sector issues Industry-specific issues Regional issues Graphs/data that reflect member sentiment on business issues Drawn from Business Climate Survey, which polled 325 of our members across a broad range of companies (released in March)

4. About Business Climate Survey Data What it represents Our Business Climate Survey is not necessarily representative of all foreign-funded firms in China We do believe that since approximately 30% of our members responded (325 respondents), it is representative of our membership Because we ask the same questions over a period of years, our BCS allows us to track sentiment over time

5. China was one of the top three investment priorities for a majority of reporting American firms in 2012 Revenue growth rates slower Profit margins still strong relative to other global markets Human resource issues dominate list of business concerns Top five concerns include labor costs, inconsistent regulatory interpretation and/or unclear laws, shortages of qualified employees, shortages of qualified management, and corruption Business Climate Survey Highlights

6. Economic Evolution Underway Signs of increasing maturity: Services play a larger role in China’s expanding urban areas World-class technologies are available and frequently used by a wide range of state and private sector enterprises Household consumption is expected to grow rapidly in the coming years New challenges: Low-cost labor, net export growth will no longer be the primary drivers of growth Productivity must grow if China is to develop beyond middle-income status

7. The Role of Foreign Firms Foreign companies can offer: Productivity gains Managerial proficiency Technological expertise Unfortunately, restrictions on foreign participation limit their ability to contribute Implicit or explicit support to state-owned enterprises (SOEs) also hinders both domestic and foreign-owned private sector enterprises

8. Priority Recommendations Investment - streamline inbound foreign investment approval processes by allowing “encouraged” investments to be filed for the record without project and foreign investment approvals Standards - allow non-Chinese testing organizations to carry out testing in China Transparency and Engagement - allow foreign-invested enterprise (FIE) participation during the drafting of, and provide 60-day comment periods for, all draft laws and regulations IPR - increase transparency and openness of IP legislative and regulatory activity by allowing adequate opportunity and sufficient time to provide comments Chamber appreciated invitation over past year to comment on draft patent, copyright, and trademark legislation

9. How Foreign Firms Can Contribute Environmental quality FIE participation – many foreign companies have already combated air, soil and water pollution problems aggressively over the past several decades at home, through the adoption of cleaner technologies, as well as monitoring and treatment of emission sources Energy use Comprehensive oil and gas legislation making foreign participation financially viable, including in shale oil and gas, can help further reduce China’s reliance on coal as a primary energy source

10. How Foreign Firms Can Contribute Food and product safety Strengthening China’s food safety regime, including through a more unified set of science-based regulations, would help reduce risks to final consumers Moving seed production and other restricted agricultural sectors to the “encouraged” investment category would assist agricultural modernization, helping China to reach international productivity levels

11. How Foreign Firms Can Contribute Healthcare and elderly care Higher share of the population will be of retirement age, yet traditional care-giving by family may not be sufficient A State Council initiative to make it easier for foreign firms to invest in this area has not been implemented, creating uncertainty and delaying foreign investment

12. How Foreign Firms Can Contribute Internet speed and security Faster, more efficient Internet access would help China accomplish some of its own goals, including promoting consumption, helping Chinese companies become internationally competitive, and encouraging the growth of small business Online data security key to business confidence, strong investment in R&D Innovative Internet and strong IP enforcement key to innovation economy We encourage the adoption of international standards to facilitate joint innovation between foreign and Chinese firms, as well as full voting rights for foreign companies in standards- setting bodies, and the removal of equity caps on foreign investment in areas such as telecom

13. Key Domestic Reforms Liberalizing financial markets Halt financial repression Support growth of domestic demand State-owned enterprise reform Private firms compete on an equal footing with the remaining SOEs China’s marketplace would even more competitive

14. DC Outreach Conference on hot issues affecting US-China commercial relationship Meet with US Congress and Federal Agencies to discuss current AmCham advocacy priorities AmCham’s President, Chairman, and members who bring a breadth and depth of industry knowledge Distribute White Paper to every member of congress, distributes at the conference, and hand delivers it to every meeting conducted during the Outreach

15. DC Outreach USG Meetings: USPTO USDA Commerce EXIM USTR State – China Desk State – Office of Policy Planning USTDA DOE SEC Office of Vice President & National Security Staff