Brand owners mixed on China

22 September 2011

BEIJING: Brand owners around the world regard China as the country providing the greatest growth opportunities, but also posing the most challenges, according to a new report.

Allen & Overy, the law firm, interviewed 1,004 senior executives globally, 44% of which named China among the top three nations offering the strongest growth potential, ahead of India on 34%, the US on 23% and Brazil on 14%.

In evidence of this trend, the study revealed foreign direct investment in China reached $108bn in 2010, the same level as recorded in 2008, suggesting the impact of the economic crisis has been limited.

However, China was similarly placed in the three hardest countries to enter by 21% of respondents, albeit only slightly in front of America, which registered 19%, and Russia, receiving 17%.

The primary obstacles being observed in China currently include the regulatory environment, a factor cited by 33% of contributors to the analysis.

Elsewhere, 17% of the panel agreed that start-up costs presented difficulties, and another 15% stated restrictive practices hampered the potential pace of development in the world's most populous nation.

"The uncertain legal environment, questions of local favouritism and doubts over the quality of the judiciary remain issues, although there have been improvements in these areas especially in the major cities," the study said.

An additional field where non-indigenous companies were keen to see change concerned ownership laws, given that joint ventures are required in almost all categories, and foreign investment is outlawed in sectors like financial services, online and real estate.

Overall, 22% of businesses expressed a desire for new rules governing such activity, something Allen & Overy argued was based on "actual experience", as 41% of the sample already trade in China.

More specifically, 42% of American organisations wanted a shift in official policy here, matched by their counterparts from Brazil, but falling behind the 55% logged by operators headquartered in South Korea.

Companies from the manufacturing, technology, media and telecoms industries posted above-average scores on this metric, not least because their intellectual property is often "disadvantaged".

In a sign of the evolving economic balance of power, Allen & Overy also reported that foreign direct investment by Chinese firms hit $68bn in 2010, up on just $12.2bn in 2005.

Data sourced from Allen & Overy; additional content by Warc staff