US Companies' China Outlook: Continuing Optimism Tempered by Operating Challenge and Threats
Source: the US-China Business Council. All rights reserved Date: 2007-10-18
Washington, DC, October 4, 2007 - US-China Business Council (USCBC) member companies operating in China reported further market expansion in 2007 but continue to encounter difficulties finding qualified personnel, obtaining business licenses in many sectors, and enforcing intellectual property rights (IPR). Rising protectionist sentiments in both China and the United States also threaten to undermine the gains made to date, according to results of USCBC's annual survey.
The full report is available at http://www.uschina.org/public/documents/2007/10/uscbc-member-survey-2007.pdf.
USCBC members highlighted the following concerns:
Human resources
China is experiencing shortages of managers, financial specialists, lawyers, accountants, and other employees with the professional and technical skills companies require to fill key roles.
Administrative licensing
China's World Trade Organization (WTO) entry has opened more sectors of the economy to foreign participation, yet companies also report corresponding difficulties in obtaining business and administrative licenses. Procedures are opaque and lines of jurisdiction among regulators are often unclear.
IPR enforcement
IPR concerns continue to affect company operations, even as companies expand their market presence. Two-thirds of respondents noted that China's lack of a viable IPR protection and enforcement system affects their willingness to bring their top products to China's markets or to engage in research and development there.
Protectionism in China and the United States
Companies expressed concern over the potential of protectionism in China and the United States to affect their business operations in China. Respondents cited emerging Chinese investment policies as threatening to restrict openings made as part of China's WTO entry. The prospect of harmful US congressional legislation is a serious concern for USCBC members, with 87 percent of respondents identifying this as a growing threat over the past year.
Aside from these issues, companies are taking advantage of the openings in the Chinese market:
Companies are profiting and optimistic
USCBC members see China as important to their company's global operations: Eighty-four percent of respondents said China was at or near the top of their companies' priorities.
Eighty-three percent of respondents said their China operations were profitable, up slightly from the results in the 2006 survey, and two-thirds say their profitability rate in China meets or exceeds their company's global rate.
Eighty-five percent of respondents said their China revenues increased in 2006, up from 70 percent in last year's poll, and 92 percent expect the increases to continue in 2007, up from 80 percent in 2006. The overwhelming majority of respondents, 93 percent, view their companies' medium-term future in China positively.
USCBC members are primarily serving the Chinese market
Nearly all respondents, 96 percent, indicated they were primarily in China to access or serve the Chinese market.
Another 46 percent said a secondary motive is to use China as an export platform for Asia and or other parts of the world.
Only 28 percent of companies indicated their China operations were set up to export to the US market, an important and consistent finding that is often overlooked in discussions about US companies operating in China.
US companies bring higher pay and better facilities to China
Three-quarters of respondents noted that they pay employees above the average wage paid by domestic Chinese enterprises.
Almost all respondents (97 percent) indicated that they bring their companies' global environment, health, and safety (EHS) standards to their operations in China. Ninety-nine percent say these standards either exceed or meet local Chinese EHS standards.
The US-China Business Council (USCBC, www.uschina.org) is the leading organization of US companies engaged in business with the People's Republic of China. Founded in 1973, the USCBC provides extensive China-focused information, advisory and advocacy services, and events, to roughly 250 US corporations operating within the United States and throughout Asia.
