U.S. firms are increasingly vexed over growing Chinese red tape that prevents them from expanding quickly in China's vast market, a survey by the American Chamber of Commerce showed on Tuesday.

Road blocks faced by firms in getting business licenses have multiplied to the extent that companies are now more worried about bureaucratic hurdles than by nebulous laws and regulation or corruption, AmCham's annual survey on China's business climate showed.

The number-one challenge that our members listed this year is bureaucracy, Ted Dean, AmCham's chairman in China, told reporters at a media briefing. Members are saying that licensing procedures have become more difficult.

The survey took pains to stress that U.S. firms want to stay in China, but criticisms were also thinly veiled, making plain the alternating love and hate that executives feel when it comes to doing business in a tightly controlled environment in the world's fastest-growing major economy.

As China enters the tenth year in the World Trade Organization, the goal of a fair and transparent regulatory environment has not yet been achieved, Dean said.

Dean said U.S. firms believe they are discriminated against when they apply for licenses because they face delays and a lack of transparency, and at times are unable to get the licenses that their Chinese peers have received.

AmCham's poll of up to 434 U.S. firms showed 31 percent ranked bureaucratic processing as the biggest challenge, up from last year's 23 percent. It also showed 42 percent of 220 respondents said it was most difficult to get a new business license.

This is frustrating since more and more firms want to court the Chinese consumer.

This is just the moment when companies are looking to benefit from domestic demand in the market and looking to sell into the domestic market, Dean said.

FIRMS STILL EXPANDING

Although China has made significant progress in welcoming foreign firms since joining the World Trade Organization in 2001, companies want China to move even faster.

Occasional setbacks, as with Google Inc's accusation on Monday that the Chinese government is foiling its Gmail service, is also unhelpful. China's Foreign Ministry on Tuesday dismissed Google's accusation as unacceptable.

AmCham's survey outlined a laundry list of concerns that foreign firms usually have when operating in China -- difficulties in hiring managers, unclear laws and regulations, inconsistent interpretation of regulations, and infringements of intellectual property rights.

Preferential treatment that Chinese firms get when it comes to bidding for contracts from China's government was also a growing concern among foreign firms.

Forty percent of firms polled said they believe China's policy of favoring indigenous innovation would soon start to hurt their profits. But for now, almost 70 percent said they have yet to feel an impact.

Still, firms are not slowing their China expansion plans.

Nearly 10 percent of 281 firms polled said they plan to expand their business by more than 50 percent this year, with 33 percent planning to grow operations by between a tenth and a fifth.

(Reporting by Koh Gui Qing; Editing by Ken Wills)

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