After several years of strong financial performance, US companies in China have begun to temper their outlook amid slower economic growth and rising costs, according to the 2012 Business Climate Survey conducted by the American Chamber of Commerce in the People’s Republic of China (AmCham China).
Despite these new pressures, China is increasingly viewed as a compelling market in its own right. A steadily-growing majority of survey respondents 66 percent in 2012 say their goal is to produce goods or services for China, up from 58 percent just two years ago.
A significant number (39 percent) said their profit margins in China were higher than in other geographies around the world. Just over three quarters of those surveyed expect their China revenues in 2012 to be higher than last year.
Yet businesspeople surveyed by AmCham China also expressed more measured optimism than last year. Corporate revenues are expected to grow at a slower pace than in 2011. Against a backdrop of less robust sales gains, many respondents have also begun to worry about rising costs, including higher wages and China’s new social insurance tax.
At the same time, those surveyed say inconsistent or unclear business policies remain one of their biggest challenges in China, and there are growing concerns that momentum for regulatory reform has slowed.
“Our members view China as a critical long-term growth market, and over 80 percent of them plan to increase investment in their operations this year,” said AmCham China Chairman Ted Dean. “However, China’s increasingly advanced economy requires a more open, transparent and market-oriented regulatory regime. Promoting greater government transparency and more vibrant market competition would benefit Chinese as well as foreign companies. ”
Survey highlights include the following:
- Eighty-two percent of members surveyed plan to increase investment in their China operations in 2012.
- Despite widespread plans to boost investment, eighty-nine percent of member companies believe China is losing its competitive advantage due to rising costs, up 11 percentage points from last year. Just over three quarters of respondents said the cost of social benefits would hurt their China operations, compared to 53 percent a year ago.
- Many respondents are concerned that domestic companies enjoy more favorable treatment in securing required business licenses. In 2011, the percentage of respondents who said licenses are granted equally to foreign and Chinese companies declined by seven percentage points to 22 percent.
- One third of respondents say policies that force technology transfer in China have hurt their company or their clients’ assessment of the business environment in China.
- Seventy-nine percent of respondents rate China’s enforcement of intellectual property rights (IPR) as ineffective. The percentage of respondents who rated China’s IPR enforcement as effective declined nine points from last year.
- Almost three fourths of those surveyed said slow or unstable Internet access makes it harder to do business efficiently in China.
About the annual Business Climate Survey:
Each year AmCham China surveys its member companies on a broad range of topics relating to the business climate in China. The fourteenth annual survey included responses from 390 members based in Beijing, Tianjin, the Northeast chapter (Dalian) and Central China chapter (Wuhan). Respondents work for companies across a broad spectrum of industries, from financial services to healthcare, manufacturing, technology, and retail. The survey was conducted in November and December of 2011.
