Thu, 12/10/2009 - 11:30
U.S. companies warm to China despite economic winter
by Wee Ling Soh
Shanghai. December 10. INTERFAX-CHINA - Most American companies in China are looking ahead to further growth, according to a report released by the American Chamber of Commerce in Shanghai on Dec. 9.
The 2009 China Business Report stated that 90 percent of the companies surveyed are optimistic on the business outlook in China for the next five years. About 64 percent of the respondents plan to increase their investments in China in 2010, of which the majority cited a maximum 15 percent increase in investment.
The report was based on findings from AmCham Shanghai's annual business climate survey conducted in October and November this year on a total of 369 large and small-sized American companies based in China. According to the report, 74 percent of the respondents place China within their top three investment priorities, with nearly 20 percent ranking it as No. 1, up from 68 percent in last year's survey.
However, only 47 percent of the respondent companies reported year-on-year revenue increases in this year's survey as compared with 88 percent in 2007. The proportion of American companies which recorded revenue declines also jumped to 39 percent this year, the largest number since 1999.
This year, 59 percent of the respondents noted that their primary strategy in China is to access the Chinese market, up from 39 percent in 2008. Chengdu continues to rank as the top city considered for expansion, as in 2007 and 2008, followed by Wuhan, Suzhou, Xi'an and Chongqing.
Despite the gloomy economic climate, 65 percent of the respondents remained profitable and found China a bright spot relative to their global operations. A decade ago, 58 percent of those surveyed reported that China margins were lower than their worldwide margins.
Overall, this signals good news for American companies with operations in China that are struggling in other markets harder hit by the economic downturn as they are reaping the benefits today for their strategic decision to focus on China, the report noted. Over 34 percent of the companies surveyed have been in China between 10 and 20 years.
Cost pressures are exerting a much lesser influence on margins this year, according to the report. Instead, American companies are more preoccupied with sales issues in keeping existing customers and finding new ones. Notwithstanding, the maturing market in China means that competition from Chinese firms has also increased steadily.
