91% of US firms bullish over Chinese business

A record 91 percent of US companies in China are optimistic over the outlook for their Chinese operations because of the growing importance of the domestic market, but for the second year in a row their business performance fell in 2012, a survey showed yesterday.

According to the 2012-2013 China Business Report done by the American Chamber of Commerce in Shanghai, 91 percent of the 420 companies surveyed said they are "optimistic" or "slightly optimistic" about the prospects for their business over five years in China, a market they are committed to.

But only 73 percent of the US companies in China were profitable last year, declining from 78 percent in 2011 and 79 percent the year before, according to the survey.

For the second straight year, American firms saw a dip in year-on-year performance indicators, including profitability, revenue and operating margins, the survey said.

"We should no longer expect China's economy to grow at the same double-digit rates of years past," said Brenda Foster, president of AmCham Shanghai. "Steadily rising costs, human resource constraints and an increasingly competitive environment will also be the rule rather than the exception in the years ahead."

The survey also revealed that more than 40 percent of firms posted higher margins in China than what they achieved globally and nearly two-thirds said revenue growth in China was bigger than their global revenue growth.

China was ranked the top investment destination for more than one-fifth of companies, a survey record, and 75 percent rated it among the top-three investment priorities in this year's survey.

In addition, nearly 75 percent of companies said they plan to increase investment this year, the highest level seen over the last three years of the survey.

Nearly two-thirds of companies surveyed said they are "in China for China" to compete in the growing domestic market driven by increasing household income, which grew by nearly 10 percent in 2012.

But more than two-thirds of the US companies firms said the regulatory environment is either "not improving" or "deteriorating."