American Companies Confident in China's Path to Reform

GUANGZHOU, China, Feb. 25, 2014 /PRNewswire/ -- The American Chamber of Commerce in South China (AmCham South China) today released its 2014 Special Report on the State of Business in South China and 2014 White Paper on the Business Environment in China.

(Photo: http://photos.prnasia.com/prnh/20140226/0861401020-a )

(Photo: http://photos.prnasia.com/prnh/20140226/0861401020-b )

"I think the key take away from our latest research is that private enterprises are 100 percent behind President Xi and his colleagues in the Politburo," said AmCham South China President Harley Seyedin. "We all have tremendous confidence in the ability and dedication of these men as they guide China toward a brighter, more prosperous future."

The Special Report collects and analyzes the results of AmCham South China's ten-year-running study of companies' experiences in South China. This year, data showed that more than 73 percent of participating companies were primarily engaged in producing goods or services for the domestic Chinese market, rather than manufacturing in China for export to other countries. As late as 2006, a strong majority reported being engaged primarily in manufacturing for export.

This year, 84 percent of study participants ranked the business environment in South China as "Good/acceptable", "Very good" or "Outstanding"; meanwhile, roughly 50 percent of participants felt the business environment had improved over the past 12 months against 22 percent who felt it had worsened.

81 percent of study participants reported that they had taken advantage of the labor market to hire new employees, leading the business organization to estimate that its members had hired nearly 774,000 new employees over the course of 2013.

Reinvestment budgets continued their recovery from a multi-year slump which coincided with the worldwide economic slowdown, with study participants reporting 1-year reinvestment budgets 30 percent higher than those for 2013. Based on that growth, AmCham South China estimates that its more than 2,000 members have allocated in excess of $13 billion to expand their operations in China.

That growth can be explained by high levels of profitability: 92 percent of participants reported either being profitable already or expecting to reach profitability within 2 years. Despite strong performance, however, 43 percent indicated that they were not meeting budget expectations for profitability. This, says Mr. Seyedin, can be primarily attributed to growing competition from increasingly-sophisticated domestic enterprises.

The lists of participants' major concerns at the present and over the coming three years continue to be topped by "Regulatory Issues (Chinese Government)," a result which is perhaps unsurprising given that the local regulatory environment for companies is the one most likely to have an impact on their operations. Other concerns include local competition, rising labor costs, difficulty finding both skilled and generalist employees as well as foreign competition.

Another question, intended to track perceptions of external risk, saw companies tagging "Increasing inflation" and "Increasing minimum wage standards" as the two biggest sources of concern for future operations. Equal numbers of participating companies felt appreciation of the RMB's value would have positive and negative effects on future operations.

Asked about a hypothetical Free Trade Zone in South China, roughly 42 percent of participants indicated interest in expanding into such a zone while 30 percent showed no interest or ambivalence. 28 percent of participants reported that they were uncertain about potential positive or negative effects of such a move.

Meanwhile, 54 percent of participants indicated that a more freely-convertible yuan would have a positive effect on their China operations, a slightly larger majority than those indicating that a more freely-convertible yuan would have a positive effect on their company's global operations. In both scenarios roughly 16 percent of participants were unsure about what effect such a change might have, and in both cases approximately 30 percent reported that easier convertibility would actually have a negative effect on their operations in China and internationally.

The White Paper, now in its sixth edition, argues in favor of a new wave of economic reform aimed at stimulating the private sector and unlocking the innovative potential of China's as-yet small entrepreneurial community.

Both documents may be downloaded free of charge from the chamber's website at www.amcham-southchina.org.

About The American Chamber of Commerce in South China

The American Chamber of Commerce in South China (AmCham South China) is a non-partisan, non-profit organization dedicated to facilitating bilateral trade between the United States and the People's Republic of China. Certified in 1995 by the U.S. Chamber of Commerce in Washington D.C., AmCham South China represents more than 2,000 corporate and individual members, is governed by a fully-independent Board of Governors elected from its membership, and provides dynamic, on-the-ground support for American and International companies doing business in South China. In 2013, AmCham South China hosted nearly 10,000 business executives and government leaders from around the world at its briefings, seminars, committee meetings and social gatherings. The American Chamber of Commerce in South China is a fully-independent organization accredited by the U.S. Chamber of Commerce in Washington, D.C. All AmChams in China are independently governed and represent member companies in their respective regions.

SOURCE AmCham South China