US Companies Upbeat on Near Term, But Concerned On Reform Outlook in China, According to Annual Business Climate Survey

BEIJING, March 29, 2013 /PRNewswire/ -- As the China market enters a new era marked by more moderate economic growth and rising labor costs, US companies remain upbeat on the near-term outlook, according to the latest Business Climate Survey from the American Chamber of Commerce in the People's Republic of China (AmCham China). Over three quarters of respondents indicated they were optimistic about how their companies will perform over the next two years in China.

Yet the survey also reflects growing concerns that the momentum for reforms has lagged. Only 28 percent said the quality of China's business investment environment is improving, down from 43 percent a year ago.

The chamber's 15th annual survey tallied results from 325 respondents, including members from Beijing and the chapters in Northeast China (Dalian), Tianjin, and Central China (Wuhan).

In general, members' China operations showed strong performance. Nearly three quarters – 71 percent – said their company posted sales growth in 2012. And 44 percent report the profit margins for their China operations are higher than their company's global average.

But member companies have recently been reining in the scale of their expansion plans. For example, as recently as four years ago, a third of respondents expected to increase investments in the range of 21 percent to over 50 percent within a year; now only 18 percent do.

Asked why they plan to moderate expansion, one third of respondents cited expectations of slower economic growth in China. But substantial numbers also singled out concerns about the business environment: 26 percent pointed to market access barriers for foreign companies, and 22 percent said regulatory uncertainty was a factor.

"The results of this year's survey reflect a slightly more conservative business outlook, as China focuses on promoting higher-quality economic expansion in an era of rebalancing," said AmCham China chairman Greg Gilligan. "Especially in an environment with slower growth, the tenor of business policies has a substantial impact on investor sentiment. Regulatory improvements and progress on market reforms would help to inspire confidence that China is creating the conditions for sustainable long-term business growth."

Other highlights from this year's results include the following:

• This year, the percentage of respondents who said their goal is to sell directly into the China market reached a historic high, at 71 percent.
• Rising labor costs and a domestic economic slowdown are tied for first place on the list of top business risks in China. Shortages of qualified employees and managers are seen as the next biggest risks.
• Only 10 percent of respondents would consider using China-based cloud computing services. For those who would not consider using the cloud in China, the main reason is worries over data security. 
• Amid rising concerns over corporate cybersecurity, just over one quarter of respondents reported that proprietary data or trade secrets have been breached or stolen from their China operations.

About the American Chamber of Commerce in the People's Republic of China:
AmCham China is a national non-profit organization representing the interests of over 1,000 companies and 3,500 individuals doing business throughout China. Headquartered in Beijing, it has chapters in Tianjin, Northeast China (Dalian) and Central China (Wuhan). For more information, visit: www.amchamchina.org

SOURCE AmCham China