US firms positive on China

12 October 2012

BEIJING: Most US companies trading in China plan to raise their investment levels in the Asian nation in the coming 12 months, reflecting widespread optimism that local revenues will grow, new figures show.

The US-China Business Council, the industry body, said in a report that China offers a $250bn opportunity for American firms. Its poll of 240 such corporations found 22% ranked China as their current main priority, while 72% put it among the top five areas of focus.

Of the featured operators, 94% were primarily active in the country to access the domestic market, and 66% intended to heighten the resources allocated to China over the next year.

A further 89% of organisations were now profitable in China, up from 85% in 2011. An additional 45% of the sample thought performance here would improve in 2012, and 30% anticipated no change on this metric.

More broadly, a 72% majority of respondents believed Chinese revenues should increase, and 18% predicted sales may remain flat, and 9% suggested a contraction was likely.

Looking ahead five years, 90% of the panel were "optimistic" or "somewhat optimistic" about the business outlook. Only 26%, however, displayed greater positivity than three years ago, whereas 45% proved less upbeat.

The premier restraints on better profitability were competition from domestic firms on 27%, rising costs on 20%, government policy and regulation to 17%, and rival foreign enterprises on 15%.

Talent recruitment and retention was perceived to be the biggest challenge overall, followed by administrative licensing, business and product approvals.

Competition with Chinese companies took third place. Some 79% of American corporations were directly up against private and state-owned indigenous players, standing at 67% for the latter group alone. This figure rose to 93% for foreign organisations.

Cost concerns were another significant issue, with 88% of firms seeing wages rise and 50% pointing to inflation. An extra 95% expressed worries about intellectual property protection, but 51% cited an improvement in this field during the last 12 months.

Additional core problems included the inconsistent application of laws, restrictions on investment and a lack of information or involvement when it came to the process of setting official standards for products.

"Despite market growth, company optimism is tempered by rising costs, domestic competition, and continuing regulatory and market access barriers," said John Frisbie, president of the US-China Business Council.

Data sourced from US-China Business Council; additional content by Warc staff