Results of the German Chamber of Commerce in China’s Flash Survey on Legal Certainty
Beijing, Guangzhou, Shanghai, 27th March 2017 – According to a flash survey on legal certainty in China conducted by the German Chamber of Commerce, most of responding German companies state that legal certainty has not improved over the last three years. The majority of the respondents have experienced legal or regulatory obstacles for their company in 2016. Major areas of concern were customs issues, non-enforceability of IPR issues, licensing requirements and procedures for products and services as well as market access denial through new regulations.
Majority saw no improvements in legal certainty over the past 3 years
Three quarters of respondents found that legal certainty has not improved over the last three years in China. Across all industries, 29% found that legal certainty in China has decreased over the past 3 years. For nearly half of respondents, the complexity, density and number of regulations have had a negative effect. Precision regarding the wording of laws and regulations has remained the same in the eyes of 49%, but has deteriorated in the eyes of nearly a third of respondents.
Most respondents have experienced legal or regulatory obstacles for their company in 2016
Two thirds of all respondents have experienced obstacles in the legal or regulatory framework for their company in China in 2016 mainly caused by intransparent regulatory processes and procedures, different interpretations of existing laws as well as insufficient prior information. For those who dealt with legal or regulatory obstacles last year, short notice changes of customs regulations or customs duties were the most widespread difficult and affected a third of respondents. New customs regulations and duties constraining the import of parts or products ranked second and affected around 27% of respondents. Customs issues are particularly prominent for respondents from the Pearl River Delta. One in four companies indicated that they could not enforce Intellectual Property Rights. Licensing issues and market access constraints are problematic for more than one in five companies. More than 85% of the respondents saw no improvement or even a worsening of the level playing field with Chinese companies regarding enforcement of laws and regulations. Capital flow restrictions introduced at the end of 2016, specifically intransparent capital control measures and lengthy approval processes were also brought up as a challenge for doing business in China.
Demand for improvements on legal certainty for German companies in China
Insufficient legal certainty hampers both market entry and market development for German companies in China. Therefore, the German Chamber of Commerce in China asks Chinese authorities to provide more legal certainty and improvements in market access and intellectual property protection, as well asincreased transparency and fair implementation of rules and regulations. This would considerably increase its attractiveness for foreign investors.
In the latest German Chamber of Commerce in China’s Business Confidence Survey published in November 2016 the issues of legal uncertainty and unclear regulatory frameworks have gained relevance moving from rank 9 to rank 6 of the top-ten business challenges of German companies in China. In order to assess the reasons behind this development, the German Chamber conducted a flash survey among its member companies in China. 117 valid responses were collected between 23rd February and 6th March 2017.