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Despite challenging market conditions and an increasingly competitive business environment, U.S. companies in China closed out 2010 with all-time performance highs and remain optimistic about their business prospects moving forward, according to the 2010-2011 China Business Report released January 19 by The American Chamber of Commerce in Shanghai (AmCham Shanghai).
AmCham Shanghai's survey of business performance in China shows U.S. companies' revenue, profitability and market share shot up in 2010 following what had been an uneven period of growth between 2008 and 2009 because of the global economic downturn. Among the report's highlights:
Although showing impressive financial results, U.S. companies report that China remains a challenging business environment for a host of reasons. Finding enough qualified staff is the No. 1 business challenge, and competition is picking up not only between U.S. and other foreign companies but between U.S. and Chinese companies – both private and state-owned enterprises (SOEs).
"This year's survey results indicate that U.S. companies in China have come to expect challenges in the China market, have weighed them against the opportunities and have found a way to succeed despite them," says Brenda Foster, president of AmCham Shanghai. "Nonetheless, it is essential that the U.S. continues to aggressively engage China to address key business challenges that hinder market access today and could impact future investment."
Issues related to a problematic regulatory environment remain a top hurdle that can hinder growth and in some industries threatens full and fair access to the China market. Nearly two-thirds (63 percent) of companies surveyed characterize the regulatory environment in which their industry operates as either "not changing" or "deteriorating" over the past year. Nearly one half report a regulatory environment that favors local Chinese companies over foreign rivals.
New additions to this year's report are AmCham Shanghai's China Business Climate Indices, which measure business performance across three broad indices – Success, Confidence and the Welcoming environment for U.S. companies in China. Businesses in China's fast growing retail sector top the Success index, Auto companies rank as the most Confident about their future opportunities and Chemicals and Electronics companies are among the industries that feel the most Welcome.
"U.S. companies in China are performing at a high level and will continue to do so," says Michael Klibaner, national research director at Jones Lang LaSalle China. "But what we show in this year's report is that just as there is no one 'China market,' the challenges and opportunities for U.S. companies vary by market sector and by industry."
Other results show U.S. companies are increasingly focused on accessing the domestic China market. An "In China for China" strategy is one of the key shared characteristics of companies that score high on the Success,Confidence and Welcoming indices.
"Goodyear is 'in China for China,' " said Pierre E. Cohade, president of Goodyear Asia Pacific. "Our biggest challenge is enhancing our production capability and talent pool to keep up with the demands of an increasingly competitive China market. To be successful, companies must invest in building both capacity and capabilities and apply best global business practices to perform well in this market."
Optimism regarding the China market continued in 2010. About nine out of 10 U.S. companies in China forecast a revenue increase for 2011. China is a the No. 1 priority for 20 percent of U.S. companies, and the percentage of companies expecting to increase investment in China by more than 15 percent more than doubled in 2010.
"There has always been a great deal of optimism about the China market, mostly based on the hope of future opportunity," says Steven Ganster, managing director of Technomic Asia. "But now we're seeing a more 'mature' or seasoned optimism, grounded in the reality that succeeding in China is critical to the future of the company no matter the challenges it presents."
About the 2010-2011 China Business Report
The 2010-2011 China Business Report highlights the results of the 2010-2011 China Business 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 ten years survey data.This year's survey was conducted online from mid-November to early December 2010. A total of 346 companies participated, yielding a response rate of 25 percent. The AmCham Shanghai China Business Survey is one of the longest running surveys of American companies in China.