The American Chamber of Commerce in China and the American Chamber of Commerce in Shanghai are pleased to present the 2004 White Paper on American Business in China, continuing our tradition of compiling our views on business issues.

This is the sixth time AmCham-China has published the White Paper and the second year the two chambers have collaborated on its production. With six years of data from our members on the ground, the White Paper offers a broad and in-depth view of the business climate, the impact and implementation of China's commitments to the World Trade Organization (WTO), and our expectations for the future.

Last year's report conveyed an overall sense of dissatisfaction with the slow pace of implementing some of China's WTO commitments. Our message this year is much more positive.

With the exception of intellectual property rights, we believe China is substantially in compliance with its WTO deadlines and specific obligations. While some commitments remain problematic and there continue to be many areas where the market access opportunities anticipated still have not been realized, China has taken noteworthy steps this year to comply with its basic commitments in the areas of trading rights, insurance, auto finance, and agriculture, among others. Some of this progress resulted from bilateral dialogue between the United States and Chinese governments, in particular at the April 2004 Joint Commission on Commerce and Trade, for which we commend both governments for their constructive efforts and encourage more of the same in the future.

From the perspective of the American business community on the ground, China's performance on WTO remains a cornerstone in laying the foundation for business success. And, for the second consecutive year, our survey of our member companies shows that they remain bullish on the China market with twice the number planning to expand their businesses in China compared to last year, with revenues growing, and with profits on average higher than elsewhere in the world. Clearly, this is a result of continued high economic growth rates and expanding market opportunities in an economy that more and more impacts overall global business conditions. It also clearly is a vote of confidence in the overall management of the economy.

As we are essentially at the mid-point of the five-year WTO implementation timetable, our members indicate that China needs to complement its overall solid 2004 WTO performance with greater transparency in the drafting of its commercial laws and regulations and ensuring that local and provincial governments do not thwart market access commitments made at the national level. Transparency and local and provincial compliance with WTO commitments hold the key to resolving many of the problems American business faces in China today. The WTO commitments are the core, but not the whole, of China's current policy of economic opening and reform and, as such, they are a necessary, but not sufficient, condition for full market access.

This White Paper draws specific attention to intellectual property rights (IPR) and standards. Both issues impact a broad variety of products and technologies, such as media and entertainment, information technologies, consumer goods, pharmaceuticals, cosmetics, construction, and electrical equipment. Our members report that the situation in IPR seems to be worsening, with over three-quarters reporting that they are negatively affected by IPR infringement.

Fifty percent of our high tech companies report they are negatively affected by new technology standards and certification issues. Indeed, IPR and standards issues often go hand-in-hand as China pursues the development of world-class domestic companies. Our goals are an effective deterrent to IPR infringement and full and fair, non-discriminatory access and participation in the standards development process.

Our AmCham organizations are member-driven and the White Paper exemplifies our spirit of commitment and cooperation. Each year dozens of individuals contribute their time and expertise in a sincere effort to promote a healthy business environment in China, and, in so doing, create a useful advocacy tool. Most of our recommendations are directed toward the Chinese government, but we also address the U.S. government with respect to the U.S. visa policy and its impact on business. All our policy recommendations are intended to promote sustainable, broadbased economic growth and fair market opportunity. Consistent with our mission in China, we endeavor to do this in a spirit of constructive dialogue and partnership.

We thank our members in Beijing and Shanghai who contributed to the success of this year's White Paper and, on their behalf, we welcome your comments.

Jim Gradoville Chairman American Chamber of Commerce in China

Phil Branham Chairman American Chamber of Commerce in Shanghai

September 2004