US firms remain optimistic about China

US companies remain optimistic about their corporate futures in China, despite slowing GDP growth, rising operating costs and regulatory challenges, according to a report released Wednesday by the American Chamber of Commerce in Shanghai (AmCham Shanghai).

Specifically, 73 percent of the 377 executive respondents said that their Chinese operations were profitable and 75 percent reported revenue growth in 2014, said the report, which is based on an annual survey conducted by AmCham Shanghai in partnership with Control Risks, a global risk consultancy.

Meanwhile, optimism within the American business community remains high, with 85 percent reporting an optimistic or slightly optimistic five-year outlook, according to the report.

"The survey data on the business performance shows that our members continue to succeed and embrace opportunities in China," Kenneth Jarrett, president of AmCham Shanghai, said at a launch event for the report Wednesday.

While some media reports said that global investment was leaving China due to the slowing economy, US companies still expressed continued commitment toward investment in China.

According to the report, 29 percent of the companies surveyed ranked ­China as their No.1 global investment priority, while 96 percent reported they had maintained or increased investment levels in China operations last year. Also, 67 percent reported a planned increase in investment in their forecast for 2015, with 28 percent expected to maintain investment unchanged from the level of 2014.

"In spite of recent reports on capital moving out of China, we still achieved the targets [of attracting foreign investment to the zone last year]," Ryan Keh, an assistant to the director with the Investment Promotion and Service Bureau under the Administration Committee of Pinghu Economic-Technological Development Zone in East China's Zhejiang Province, told the Global Times Wednesday.

"There's still interest in investment even when the economy is slowing," Keh said.

At an industry level, the report also found that the healthcare industry had the highest level of confidence in their corporate futures in China. This is despite the fact that they reported the lowest profitability.

"It makes sense, because the healthcare industry is growing so fast [that] people feel very optimistic about introducing more foreign companies to the Chinese market," Shirley Zhao, China president of US pharmaceutical company Allergan, said at the event. "A lot of new companies come to China, so there is a high percentage of them who have yet to make a profit."

In addition, the report also showed that general optimism may have been tempered due to an increase in operating costs, potential risk of an economic slowdown and perceptions of regulatory bias against international companies. Companies also said that a lack of transparency continues to hinder business, as the report described the regulatory environment as increasingly unclear.

"Overall, business challenges were greater than the regulatory challenges," Kent Kedl, managing director of Greater China and North Asia for Control Risks, told the event. "Top business challenges were getting worse, while top regulatory challenges were staying the same."

The top business challenge in China last year was rising costs, followed by human resource constraints and domestic competition, with 91 percent of respondents indicating costs as their No.1 challenge. Meanwhile, companies ranked the top regulatory challenges facing US companies in 2014 as an unclear regulatory environment, difficulty enforcing contract terms and tax administration, according to the report.

"The biggest challenge we have right now is the speed of change or reform. As a bank, we receive about four or five hundred regulation changes every year," Carl Wegner, managing director of Deutsche Bank, told the event. "[But] the reform is a fantastic opportunity … so the biggest challenge for financial institutions is keeping up with those changes and regulations."

"As [Chinese President] Xi Jinping has been saying, there is a 'new normal.' It's not going back to what it was, there will be something there, so temporary discomfort, but a new compliance standard will be established," Kedl noted.