Two days after China levelled the largest corporate fine in its history against Qualcomm Inc. (QCOM) for monopolistic practices, the American Chamber of Commerce in China, the chief lobbying group for U.S. companies like Qualcomm, released its annual member survey that asked questions such as, “Do you feel foreign businesses are more or less welcome in China than before?”
One of China’s regulators, the National Development and Reform Commission, spent more than a year investigating Qualcomm’s business in 3G and 4G mobile patents, before deciding to force the chipmaker to accept reduced license fees and unbundle patent packages.
Analysts were mostly positive on the $975-million fine. Some said Qualcomm’s penalties weren’t as severe as they could have been, but others have cautioned the investigation was part of a larger policy targeting foreign firms. AmCham China asked U.S. companies if they think foreigners are indeed targets.
“A majority of our members believe foreign firms have indeed been singled out in these campaigns,” AmCham China chairman James Zimmerman said on Wednesday.
Fifty seven percent of the companies surveyed by AmCham China believed foreign firms were being targeted, while 47% of companies feel less welcome than before, a three percentage point increase from last year. Industrial and R&D intensive industries had the highest percentage of firms feeling unwelcome. Service companies, meanwhile, felt the most welcomed—almost 20% said they felt more welcome than before.
Qualcomm was part of a larger trend in China over the past year. A string of cases against foreign firms culminated last fall after foreign automakers, U.S. tech companies, infant milk powder firms, Japanese auto parts businesses had all incurred fines under China’s anti-monopoly law.
The AmCham China survey is in many ways a reflection of China’s bigger economy. More than 30% of U.S. firms had no investment expansion plans in China this year, the biggest percentage since 2009, as China’s economic growth slows amid a declining real estate market.
For the first time, a majority of companies said China’s notorious air pollution made it difficult to recruit senior executives to work in the country. This comes just two weeks after Beijing’s mayor said the city was unlivable because of its air pollution.
There was positive news to come out of the survey too. Corruption fell off the list of top business challenges, dropping from the four most important challenge two years ago to number thirteen today. Meanwhile, revenue growth for 2015 remained positive among a majority of companies. Although fewer companies are expecting higher margins in 2015, 70% of companies enjoy equal or higher margins in China compared to their global average.
Zimmerman, the AmCham China Chairman and a longtime trade attorney in China, cautioned against reading too much into the results of foreign companies being “targeted.” He noted recent regulatory cases against Chinese companies, including Alibaba Group Inc’s (BABA) fake-goods case and crackdowns in food safety. Of the antimonopoly enforcement, he said, “I don’t know that it’s unfair.”
Many businesspeople in China have said something similar over the past year: although foreign companies are being leveled with higher fines and higher-profile cases, it’s not certain that Beijing set out specifically to target them. It may just be that China’s young anti-monopoly law—only six years old—is being enforced by inexperienced regulators.
The perception among American businesspeople in China, however, is that the Chinese government is coming after them.