March 20, 2023

Survey Details Data Theft Concerns for U.S. Firms in China

BEIJING — A quarter of companies that are members of a leading U.S. business lobby in China have been victims of data theft, a report by the group said Friday, as ties between Beijing and Washington have become increasingly strained over the threat of cyberattacks.

Twenty-six percent of the members who responded to an annual survey said that their proprietary data or trade secrets had been compromised or stolen at their China operations, according to the report from the business lobby, the American Chamber of Commerce in China.

“This poses a substantial obstacle for business in China, especially when considered alongside the concerns over I.P.R. enforcement and de facto technology transfer requirements,” the chamber said, referring to weak enforcement of intellectual property rights.

Mandiant, a U.S. computer security company, said in February that a secretive Chinese military unit was likely behind a series of hacking attacks that targeted the United States and stole data from more than 100 companies.

That set off a war of words between Washington and Beijing.

Representative Dutch Ruppersberger, Democrat of Maryland, said last month that U.S. companies had suffered estimated losses in 2012 of more than $300 billion due to the theft of trade secrets, much of it the result of Chinese hacking.

China says the accusations lack proof and that it is also a victim of hacking attacks, more than half of which originate from the United States.

Hong Lei, a spokesman for the Chinese Foreign Ministry, called the survey a “completely irresponsible action.”

“We hope the relevant side doesn’t politicize financial and trade problems, does not exaggerate the so-called issue of online leaks and does more conducive things for China and the United States,” Mr. Hong told reporters Friday.

The survey by the chamber, commonly known as AmCham, was conducted among 325 members across China late last year, before the release of the Mandiant report.

Only 10 percent of companies in the survey said they would use China-based cloud computing services, with most citing security concerns. Blocked Internet searches in China had impeded business for 62 percent of respondents.

U.S. officials have pressed China to address Internet attacks and cyberspying against U.S. companies. President Barack Obama raised hacking concerns in a phone call with President Xi Jinping of China earlier in March.

A recent assessment by U.S. intelligence leaders said that for the first time, cyberattacks and cyberespionage had supplanted terrorism as the top threat.

Most companies in the AmCham survey expressed optimism about the business outlook in China, with many reporting higher profit margins for their China units. But companies gave lower expectations for future investment and cited rising labor costs as a top concern. Perceptions that China’s investment environment is stagnating are increasing, according to the survey.

Member companies “have not felt over the last four or five years that there have been commercially significant positive changes in the business environment or the investment environment,” Christian Murck, president of AmCham China, told reporters.

“When you have an economy which is making a transition to a market economy, but which is not yet there, there is a feeling that if you are not moving forward with an indicated path of future policy that you are effectively moving backward,” he said at a briefing on the survey.

The survey also cited a steep increase in concerns over the protection of intellectual property, like copyrights and trademarks, with 72 percent of respondents saying enforcement in China was ineffective or totally ineffective, an increase of 13 percentage points over last year.

Perceptions that technology transfer was increasingly a requirement for access to China’s market also jumped 10 points to 37 percent, the chamber said, with higher rates of concern reported in the aerospace, automotive, chemical in information technology sectors.

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You’re the Boss Blog: Have You Tried Selling in China?

Today’s Question

What small-business owners think.

A small-business guide we have just published quotes Savio S. Chan, who is president and chief executive of U.S. China Partners, a consulting firm that over the last eight years has helped nearly 100 American companies do business in China. Initially, the firm connected these companies with manufacturers and suppliers in China; of late, it has helped more clients market and sell their products and services in China. Both the Golden State Warriors and the New Jersey Nets of the N.B.A. called upon Mr. Chan to seek corporate partners in China to capitalize on the Chinese heritage of roster players.

“If you do it the right way, there’s a lot of opportunity in China,” Mr. Chan said. “But if you do it the wrong way, you can be blacklisted and that will come back to haunt you. You have to play by the Chinese rules and you have to be very careful. You can’t beat the system.”

To better understand the promising but foreign playing field, Mr. Chan advises, when in China, think C-H-I-N-A:

Culture: Understand China’s cultural complexity. Many of its business customs may be counterintuitive. For instance: beware of making an inadvertent gift faux pas. I heard about a Tiffany clock given as a gift to a Chinese executive by a newly arrived American who was puzzled that the gift was never acknowledged. But in China, a clock is recognition of mortality and such a gift implies you do not wish that person a long life. As we say in Brooklyn, “Who knew?”

• Harness: Build relationships within local government and use this human network to make local business connections. Be aware of the need to marshal the good will and cooperation of the government.

• Intellectual property rights: Remember that the rights to use a patent or trademark in China go to the first to file. Large companies have spent millions of dollars in China buying back the rights to their own names or logos from someone who beat them to the punch.

• Navigate: Become acquainted with and navigate markets with strong local partners. A Chinese business partner is best able to identify the pitfalls unique to the local market, and also the opportunities. One of my clients was seeking to create crystal pieces and was able to find a small village that was already producing work for Steuben and Swarovski.

• Anticipate: Be prepared for fierce local competition. Engineers must adopt designs that minimize others’ ability to copy them, since outright copying is common and unregulated.

What do you think? Have you tried selling in China? If so, how did it go?

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Media Decoder Blog: China in Hollywood, Hailed and Investigated

Han Sanping leads the China Film Group, which functions as the Chinese government’s guardian of the world’s second-largest film market in box-office receipts.China Photos, via Getty Images Han Sanping leads the China Film Group, which functions as the Chinese government’s guardian of the world’s second-largest film market in box-office receipts.

LOS ANGELES — The powerful gatekeeper of China’s rapidly growing film world, the China Film Group chairman Han Sanping, will be here on Oct. 30 to receive an award as the China Entertainment Visionary of the Year. He will be honored at the third annual U.S.-China Film Summit, sponsored by the Asia Society of Southern California.

When Mr. Han arrives, it appears there will be a still-unanswered question waiting: What has become of the investigation by United States officials into possible violations by companies here of the Foreign Corrupt Practices Act in their dealings with Chinese film companies?

Word of the investigation surfaced in April with reports that the Securities and Exchange Commission had contacted a number of Hollywood studios about their business in China.

Mr. Han, whose company is the principal conduit for China’s film dealings with foreigners, said at the time that he knew nothing of the investigation, or any improper dealings.

But the China hands on this shore are hungry to know more about the inquiry. In August, Variety reported that Hollywood lawyers, during a panel discussion conducted by the Beverly Hills Bar Association, complained that uncertainty over the investigation was threatening to put deals on hiatus.

Given the enormous expansion in China’s entertainment links with United States companies, including the acquisition last month of AMC Entertainment by the Dalian Wanda Group, this year’s film event, to be held at Covel Commons on the University of California, Los Angeles, campus, will be a hot one. Those attending include Lewis Coleman, the president of DreamWorks Animation, who, like Mr. Han, will receive an award, and Bruno Wu, the chairman of China’s Seven Stars Entertainment.

But it won’t be easy to get through the very first panel discussion, titled “Year in Review in Hollywood-China Relations,” without discussing the big question: What’s up with the investigation?

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Europe Debt Crisis Weighs on Siemens

Profit in the last three months of 2011, which is Siemens’ fiscal first quarter, fell 17 percent to €1.5 billion, or about $1.95 billion, compared to a year earlier. Sales rose 2 percent to €17.9 billion, but a 5 percent decline in new orders, to €19.8 billion, augured poorly for future quarters.

“The uncertainties of the ongoing debt crisis have left their mark on the real economy,” Peter Löscher, the chief executive of Siemens, said in a statement. He said he expects a recovery in the second half of the year but “we must work hard to achieve our goals.”

The company, based in Munich, reported lower profit in all its major business areas, including a 36 percent decline in its energy unit, which Siemens attributed to delays in major power transmission projects and a loss in the division that makes wind turbines. The energy unit is the largest part of the company by sales.

The German economy has so far weathered the European debt crisis relatively unscathed, thanks to large exporters like Siemens that have profited from business in China and other countries where growth remains strong.

But the figures released Tuesday suggested that business from some emerging markets could be slowing. That would be a bad sign not only for Siemens but for other makers of industrial products which, along with automobiles, account for most of German exports.

Orders from Asia and Australia declined 9 percent in the quarter, Siemens said, and 3 percent for emerging markets overall. Orders from the United States rose 6 percent, the company said.

However, there were also other signs Tuesday that the looming slowdown in the European economy, and especially Germany, may not be as bad as feared.

A survey of purchasing managers by the data provider Markit Economics showed an unexpected rise in services and manufacturing output in January, led by Germany. Analysts had expected a decline.

The data “adds to tentative evidence suggesting that the downturn in the euro zone may be bottoming out,” the Dutch bank ING said in a note to clients. But the analysts added, “the underlying economic situation remains very fragile.”

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