US firms optimistic on China

1 March 2013

SHANGHAI: More than 90% of US firms are optimistic on their medium-term prospects in China, despite ongoing challenges posed by the bureaucratic and regulatory environment.

The AmCham Shanghai China Business Climate Survey polled 420 US companies with operations in China and found that while 91% were "optimistic" or "slightly optimistic" about their five-year business prospects, there had been a dip in profitability in 2012.

Some 73% of firms had profitable operations in China last year, but this figure marked a drop from 78% in 2011 and 79% the year before. A similar pattern was registered for margin and revenue growth figures.

"We should no longer expect China's economy to grow at the same double-digit rates of years past," said Brenda Foster, President of AmCham Shanghai, citing factors such as rising costs, human resource constraints and the competitive business environment.

Nonetheless, she stated that "US companies remain committed to the China market, which is critical to their global strategies."

The survey also found that two-thirds of US companies were "in China for China", and thus planning to compete in a growing domestic market as the national economy increasingly moves away from relying on low-cost exports.

Robert Theleen, Chair of AmCham Shanghai, noted: "While European companies tend to dominate the luxury brand markets, the US has carved out large parts of the rising middle-class branded consumer sectors and the transition in China's market favours companies targeting this consumer sector."

But there will be bureaucratic hurdles to overcome. More than 60% of companies said the regulatory environment was either "not improving" or "deteriorating," continuing a trend seen in previous years.

Notwithstanding the various challenges they face, US companies persist in seeing China as an investment priority, with most stating they plan to make additional global investment in the Asian nation going forward.

Data sourced from AmCham Shanghai; additional content by Warc staff