AmCham China: US companies in China fear trade war fallout and bias from dual circulation model

Foreign businesses continue to suffer “implicit bias” in China, a lobby group representing U.S. business interests in China said on Tuesday, despite Beijing officially launching policies designed to create a more equal playing field for foreign investment.

“While we recognize very significant improvement in terms of written policy, there is also that next level of implementation that doesn’t always follow the spirit and actual word of the policy,” Greg Gilligan, chairman of the American Chamber of Commerce in China (AmCham China), said on Tuesday, as AmCham China released its 23rd annual white paper on the state of American business interests in China.

Last year, China implemented a new Foreign Investment Law that broadly tackled issues hindering foreign business in China—such as the common practice of “forced tech transfers,” where foreign firms are required to share intellectual property with a local partner.

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Eliminating mandatory tech transfers was a key objective of U.S. negotiators in the U.S.-China trade war, which remains unresolved. But while China has pledged not to require tech transfers in exchange for market access—an issue Beijing said never existed—Chinese policymakers have since advocated for greater self-reliance instead.

In May 2020, President Xi Jinping said China should adopt a “dual circulation model” (DCM) to help insulate its economy from external shocks. The DCM essentially advocates boosting domestic industry where possible and reducing China’s reliance on imported technology and foreign talent.

“The announcement regarding the DCM has created concerns among the business community that China will prioritize the acquisition of critical technology without allowing [foreign companies] to compete with their technology in China on a level playing field,” AmCham’s report said.

Chinese companies, however, have faced challenges from U.S. policymakers, too. In May 2020, for example, the Trump administration prohibited companies from selling semiconductors to Huawei Technologies if U.S. technology had been used to make the chipsets. President Xi announced the DCM the same month.

According to AmCham China, which represents the interests of 500 U.S. businesses in China, “rising tensions in U.S.-China relations” was the No. 1 concern among its member companies in 2020, with 78% of survey respondents ranking it first.

“We’d like the United States government to recognize how important it is for U.S. business to succeed in China,” Lester Ross, chairman of AmCham China’s policy committee, said Tuesday. “While there are national security concerns that have to be addressed, [a full decoupling] is inconsistent with the interests of the U.S. economy.”