Compliance becomes hotter issue for U.S. firms in China: report

Mon Feb 24, 2014 10:37pm EST
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By Adam Jourdan

SHANGHAI (Reuters) - U.S. companies in China placed greater focus on compliance last year after several high profile probes into corruption and high pricing, but rising costs and a skills shortage remained their main concerns, the American Chamber of Commerce in Shanghai said in its annual report.

The handover of power to a new generation of Chinese leaders last year raised uncertainty among U.S. companies over the political environment, but they were less worried than earlier about the risk of a slowing Chinese economy, according to the report released on Tuesday.

China is the world's second largest economy and posted 7.7 percent GDP growth in 2013, slow by Chinese standards but far quicker than stagnant growth in Europe and the United States.

Issues of corporate corruption caused ripples last year after a series of investigations against firms from British drugmaker GlaxoSmithKline Plc (GSK.L: Quote) to U.S. milk powder maker Mead Johnson Nutrition Co (MJN.N: Quote).

This pushed compliance up the agenda, with 44.2 percent of the roughly 400 firms polled saying there was a greater focus on this area last year, up from 36.6 percent who said the same in 2012. Over four in 10 said they would increase compliance spending over the next year.

"Despite optimism and growth, challenges in the business and regulatory environment in China continue to hinder business," the report said.

U.S. firms turned attention from international corruption laws to China's own domestic legislation, with 46.8 percent of firms saying it was the most important area of legal compliance. That was up markedly from 31.5 percent the year before.

USUAL SUSPECTS   Continued...

Mead Johnson Nutrition milk powder products are displayed at a supermarket in Beijing August 7, 2013. REUTERS/Kim Kyung-Hoon