I have received an email from a subscriber who attended AmCham Shanghai presentation of its 2011-2012 China Business Report (315 US-based companies with operations in China surveyed). I share bellow what he felt were the main conclusions from the presentation but first I would like to thank him for taking the time to share this information:
1 China is a highly profitable market for those with a long term investment in it.
I thought the profitability number (78 percent vs 79 percent last year) was rather high, but then looked at the length of time the survey respondents had had a physical presence in China – 80 percent of the companies surveyed have been in China for more than five years, 10 percent have over 20 years’ experience and only two percent of respondents have been in China for less than two years.
2 China is a maturing market.
Legal and regulatory challenges (those which are usually unique to China, in one way or another) are a constant. So progress on this is not being made (bad). But, the challenges US companies are more worried about now are “normal” business challenges – rising costs, scarce talent, growing local competition coming from the private sector.
China has become an essential market for multinationals, going beyond a mere supportive role for companies’ worldwide operations. In 2011, 66 percent of the companies report their revenue growth in China exceeded that of their operations worldwide.
3 In China for China
US companies are meeting these challenges by localising their China operations, and are increasingly focused on the domestic market – “in China for China”.
Some key figures to back this statement:
- 58 percent of the companies produce goods or services for China as their primary strategy
- 71 percent of companies sell and support products and services uniquely designed for the China market
- 90 percent have expanded their operational footprints in China to include sales offices and research and development centers (R&D), in multiple locations outside Shanghai
- 80 percent report “high” or “moderate” priority for staff localization
- 61 percent report “high” or “moderate” priority for manufacturing localization
4 US companies in China are driving US exports
- 62 percent of the companies report they import parts or finished goods from the U.S. into China
- U.S. exports make up 32 percent of their China sales by value.
5 Short term optimism for China
Confidence is still relatively high. There is no evidence, from the survey outcomes, that US companies feel exposed to risks that have been talked about lately like those related to the housing market, the financial sector or to China’s reliance on exports to Europe.
What are your views?
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