CHINA may be losing its competitive advantage, mainly because of rising costs, according to a survey of companies compiled by the American Chamber of Commerce in Shanghai.

Rampant product piracy was another persistent problem highlighted in a report released Friday that was based on a survey of the group’s 1,600 corporate members. “Some companies mentioned plans to move offshore to India or Vietnam,” said Norwell Coquillard, president of Cargill Investments China, an investment holding company of agribusiness giant Cargill Inc. Still, he noted that most companies with operations in China were still planning to expand capacity on the Chinese mainland, often while moving factories and offices inland to smaller cities where costs are lower.

For many US and other foreign companies, finding, paying for and retaining good employees remains the biggest challenge, the report said.

“More investment has come in and stretched the supply of talent,” said Stephanie Liu, human resources director in the Asia Pacific for Armstrong World Industries, a maker of flooring and building products. “There’s no sign of easing in the short term,” she said.

Meanwhile, a new labour law, due to take effect next year, has increased uncertainties over hiring and firing practices.

The Labour Contract Law, which takes effect Jan. 1, gives employees who have worked at a company for more than 10 years the right to sign contracts protecting them from being fired without a legitimate reason.

Some companies worry that the law might restore the “iron rice bowl” of lifetime employment practised by China’s state sector during the era of central planning that followed the 1949 communist revolution, said Kent Kedl, general manager of the consulting firm Technomic Asia.