China not immune to economic downturn

01 July 2009

BEIJING: Some 98% of European companies with a presence in China say the financial crisis has impacted their operations in the country, but 48% predict the world's most populous nation will be the key driver of long-term global growth.

The European Union Chamber of Commerce in China and Roland Berger Strategy Consultants polled 313 European firms active in China, 25% of which were in the consumer goods and services sector, 39% in the professional services category, and 36% in the industrial goods and services segment.

Of this sample, 56% said China contributed more than 5% of their global revenues in 2008, a total that had increased from 51% in 2007.

A further 63% stated that their profitability in the country had increased last year, while 16% argued revenues were static, and 21% reported a decline.

However, 30% of those surveyed agreed the global recession had exerted a "strong impact" on their performance in the market, while 44% argued it had resulted in a "medium impact".

By contrast, 23% said there had been "little impact" on trading patterns in the country, and just 2% reported there had been no negative impact on their sales whatsoever.

In a measure of China's comparative strength, however, 71% of the panel said sales in their home country had suffered more heavily than their Chinese operations during the financial crisis.

Some 46% of those polled also predicted the economic downturn will be "over" in the Asian nation in the first half of 2010, with a further 19% stating this would occur in the second half of next year.

Furthermore, 52% still plan to invest in new product launches or in other initiatives in China, reaching a high of 70% in the consumer goods and services category.

In terms of revenue growth, 67% of consumer goods and services firms predicted an upturn in the sector in the next two years, compared with 58% in professional services and 68% in the industrial sector.

However, just 39% of consumer goods firms were optimistic about improving their own profitability between now and 2011, falling to 32% in the other two industry segments.

In all, 37% of firms said China has become a "key important market in our global strategy” since the start of the crisis, while 24% have increased their sales targets in the country this year.

Joerg Wuttke, president of the European Chamber, said the survey showed more needed to be done to "unleash the potential of China's economy", including promoting "more free competition and the breaking down of existing monopolies."

Data sourced from the European Union Chamber of Commerce in China; additional content by WARC staff