Key challenges persist - rising costs and competition for talent rank as top challenges while companies report little improvement in China's regulatory environment
SHANGHAI, Feb. 15, 2012 /PRNewswire-Asia/ -- Three years after the global economic downturn, U.S. Companies in China continue to report positive financial performance even as they contend with rising costs, increasing competition and an uneven regulatory environment, according to AmCham Shanghai's 2011-2012 China Business Report released February 15th at the Four Seasons hotel in Shanghai.
Seventy-eight percent of the more than 300 companies surveyed report they are "profitable" or "very profitable," roughly matching figures from 2010. Revenue growth also continued although down somewhat from the year before - 80 percent of companies report revenue growth in 2011 over 2010. Highlighting China's increasingly important role in the global strategies of US businesses, 66 percent of companies report their revenue growth in China exceeded that of their operations worldwide.
Results indicate that U.S. companies in China are increasingly driving U.S. exports to serve the China market supporting production and jobs at home. Almost two-thirds report they import parts or finished goods from the U.S. into China to support their operations here, an increase from 2010, and that U.S. exports make up 32 percent of their China sales by value.
"The mission of AmCham Shanghai is to support both the business success of our members and a healthy U.S.-China commercial relationship." said Brenda Foster, president of AmCham Shanghai. "I'm pleased to see that our members reported strong financial performance in 2011 but I am concerned that U.S. companies are facing many of the same challenges that have been raised for some time. On behalf of our more than 3,600 members, I look forward to addressing these issues with both the U.S. and Chinese governments."
While U.S. companies remain committed to competing in the China market, they are less optimistic about their business prospects in China compared to the preceding year. Rising costs take the top spot on the list of business challenges faced by U.S. companies. Perhaps as a result, the number of companies reporting increased margins from the year before slipped in 2011 to 51 percent from 66 percent in 2010.
A majority of survey participants cite leading regulatory issues - bureaucracy, an unclear regulatory environment and a lack of transparency - as a hindrance to their China business and nearly three-quarters report China's regulatory environment stayed the same or deteriorated in 2011.
These challenges are reflected in AmCham Shanghai's China Business Climate Indices. Scores among all three broad performance indicators - Success, Confidence and the degree to which companies feel China offers a Welcoming environment - were down or flat from one year ago.
"US companies are realizing gains after years of investment in China. That's the good news. But China is a tough place to do business, it always has been, and this year's China Business Climate Indices quantify that," said Kent Kedl, Managing Director, Greater China and North Asia, Control Risks. Control Risks the Chamber's Supporting Partner for the 2011-2012 China Business Report.
At the same time, China continues to be a bright spot for U.S. companies which are increasingly treating China as a maturing, fiercely competitive market that is more and more critical to companies' global strategies. Although down 10 points from last year, the number of companies projecting at least a 10 percent revenue increase reached 61 percent. Thirty-seven percent forecast at least a 15 percent increase in their China investment for 2012, down slightly from the year before. Overall, 86 percent of respondents maintain a "positive" five year outlook.
Remarking on the business climate for U.S. companies in China, Kenneth Jarrett, Chairman, Greater China, APCO Worldwide and Chair, AmCham Shanghai, said "That companies are staying the course, despite the challenges faced, speaks to the importance of the China market to their global strategies and the resilience and commitment of U.S. businesses in China. While there is much work to be done to address business and regulatory obstacles, it is clear that U.S. companies in China have come to expect challenges, have weighed them against the opportunities and have found a way to succeed in China despite them."
About the 2011-2012 China Business Report
The 2011-2012 China Business Report highlights the results of the Chamber's China business climate survey, a comprehensive survey of U.S. companies with operations in China. First launched in 1999, this year's Report builds on the results of more than ten years survey data.This year's survey was conducted online from mid-November through mid- December 2011. A total of 318 companies participated in the anonymous survey, yielding a response rate of 20 percent. The AmCham Shanghai China business climate survey is one of the longest running surveys of American companies in China.
About The American Chamber of Commerce in Shanghai
The American Chamber of Commerce in Shanghai, known as the "Voice of American Business" in China, is the largest and fastest growing American Chamber in the Asia Pacific region. Founded in 1915, AmCham Shanghai was the third American Chamber established outside the United States. As a non-profit, non-partisan business organization, AmCham Shanghai is committed to the principles of free trade, open markets, private enterprise and the unrestricted flow of information.
AmCham Shanghai's mission is to support the success of our members by promoting a healthy business environment in China, strengthening U.S.-China commercial ties and providing high-quality business information and resources.
Visit www.amcham-shanghai.org for more information about AmCham Shanghai.
About Control Risks
AmCham Shanghai was pleased to work with supporting partner Control Risks on the 2011-2012 China Business Report.
Control Risks is an independent, global risk consultancy specialising in political, integrity and security risk. We help some of the most influential organizations in the world to understand and manage the risks and opportunities of operating in complex or hostile environments. Our unique combination of services, our geographical reach and the trust our clients place in us, ensures we can help them effectively solve their problems and realise new opportunities across the world.
