HONG KONG (CNNMoney)
Many American businesses in the country also reported worrying more about data security, with over 40% of respondents saying the risk of a data breach is rising. Fifty-three percent said the risk is static, while only 5% said the risk is decreasing.
"This poses a substantial obstacle for businesses in China, especially when considered alongside the concerns over [intellectual property rights] enforcement and de facto technology transfer requirements," the report said.
While 78% of businesses said they were optimistic when asked to describe their two-year outlook, the percentage who said the investment environment is improving dropped from 43% in 2012 to 28% this year.
Rising labor costs and slower economic growth in China were most frequently cited as the greatest risks facing foreign businesses in China. The survey was conducted last November and December, and included 325 respondents.
The report comes amid elevated tensions between China and the U.S. over the issues of cybersecurity and computer hacking.
Last month, an American cybersecurity firm linked one of the world's most prolific groups of computer hackers to the Chinese government, setting off a war of words between the two countries.
The security firm, Mandiant, detailed its allegations in a 60-page report that described the tactics of the hacking group over a six-year period. Mandiant claimed it observed the hackers -- called the "comment crew" -- systematically steal hundreds of terabytes of data from at least 141 organizations across 20 industries worldwide.
Related story: Wake up, America! China is attacking
Mandiant claims the activity could be traced to four networks near Shanghai -- with some operations taking place in a location that is also the headquarters of Unit 61398, a secret division of China's military.
The Chinese government dismissed the hacking charges, insisting that China is the victim of many cyberattacks, most originating in the United States.
Despite the threat, many businesses are taking a lackadaisical approach to cybersecurity. Multiple industry studies have shown that the vast majority of companies don't begin following cybersecurity best practices until after they've been hit.
First Published: March 29, 2013: 7:38 AM ET
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