By  on March 22, 2005

WASHINGTON — Life is starting to get a little easier for foreign companies looking to sell their brands in China, as that country begins to lift some of the legal barriers they faced.

As part of its World Trade Organization commitments, in December China changed its law to allow foreign companies to open wholly owned retail operations within the country. Previously, they had been required to sell a stake in their Chinese ventures to local investors.

Even with the barriers in place, major U.S. firms, including Wal-Mart Stores Inc. and Nike Inc., have worked their way into the Chinese market, finding the allure of 1.3 billion consumers too much to resist.

U.S. officials and executives called the recent changes positive, but warned that foreign companies still face a thicket of regulations from China’s 22 provincial governments that can slow their entry into the market. A wide gap exists between the central government’s pronouncements of changes in business laws and the implementation of the formal regulations to carry it out.

“China did issue regulations that looked good on paper…but we haven’t seen the follow-through and we’ve been pressing China on this to make sure the process works properly,” said a U.S. trade official, who spoke on the condition of anonymity. “Foreign companies that establish in China are trying to work their way through the bureaucracy with the help of the U.S. government to find out how to obtain their new rights.”

The trade official claimed the government and private sector are in a “start-up period and encountering some bumps.”

“We’re spending a lot of effort on these issues to get rid of these bumps but the process isn’t completely functional.”

Many experts claim it will be years before barriers to China’s market are fully dismantled, as local governments continue to impose burdensome rules on foreign firms.

Among the concrete changes that the central Chinese government has made recently:

  • Foreign retailers are now allowed to operate an unlimited number of stores in China and own 100 percent of their Chinese venture. Previously, single-brand and multibrand retailers had to sell a stake of their business to local investors.

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