Business growth potential in China2008-11-27
I recently came across the results of the fifth annual European Chamber Business Confidence Survey and could not help sharing the results with you.
Yes, the financial crisis will definitely impact China growth.
BUT if there is a place to be at the moment, it definitely seems to be Asia and China.
On this note, more and more small and medium foreign companies are willing to set operations in China with a focus on China, not on exports.
More in the below extract and the associated Power Point presentation:
www.europeanchamber.com.cn/images/documents/marketing_department/beijing/press_release/2008/081125_bcs_presentation_en.pdf
"European Chamber Business Confidence Survey 2008 reports business growth potential in China despite rising concerns and challenges
Beijing, 25th November 2008. The European Union Chamber of Commerce in China today launches its fifth annual European Chamber Business Confidence Survey, which is published in partnership with Roland Berger Strategy Consultants. More than 250 European companies active in China reported their optimism and concerns about doing business in China.
The Survey shows that "European companies in China are generally optimistic and committed to the Chinese market and its future, despite mounting challenges". Although the Chinese economy is slowing down, the rising number of European companies in China, especially small-and medium-sized companies, demonstrates that China remains an attractive destination to investors. More companies are reporting greater profitability than last year and over two-thirds of the surveyed companies generate less than 10% of their current global revenue in China. This means the business growth potential still remains high.
Joerg Wuttke, President of the European Chamber, commented, "This year's survey re-confirms that the Chinese market is the most important emerging market for European businesses, and given the global slowdown it might actually rise in significance. European business operates in China with a focus on China, not on exports. However, investment opportunities are still too constrained by a substantial lack of regulatory transparency, increasing economic nationalism, ongoing challenges in the area of protection of intellectual property rights and the discriminatory enforcement of environmental regulations. The Chamber is convinced that resolving these issues could effectively stimulate sustainable domestic growth."
Charles-Edouard Bouee, President & Managing Partner of Roland Berger Strategy Consultants Greater China, said, "We included additional questions that get to the heart of European companies' business strategies and then conducted more in-depth analyses to reveal relationships between companies' operations and their size, industry and duration of operations in China. This year's survey is better able to capture the business rationale for decisions made by European companies in China and the particular challenges they are facing in the fast-changing business environment."
Marianne Friese, Secretary General of the European Chamber, said, "the survey provides our member companies and also business policy makers in Europe and China with insight that can help them maximise the opportunities and overcome the challenges in this growing market. We must assume that the recent events on the financial markets will influence our members’ business decisions. Considering China’s continued growth and the underlying confidence of the European businesses in China, we hope to see positive developments in the year to come".
The European Chamber Business Confidence Survey 2008 will be presented to government and regulatory agencies in China, to the European Commission and EU Member State Governments, as well as to a wide range of business organisations and companies in China and Europe.
Key findings of the European Chamber Business Confidence Survey 2008
Ongoing Trends
More European companies, and especially more small- and medium-sized companies, are operating in China
"Old China hands" tend to be larger companies; newcomers are mostly SMEs
Profitability increases the longer a company does business in China
European companies tend to structure their China operations as Wholly Foreign-Owned Enterprises (WFOEs) when given this legal freedom
Companies are optimistic and committed to the Chinese market: "In China for China"
Rising labour costs and greater domestic competition intensify pressure on European companies
Regulatory issues make European businesses in China uneasy, with transparency and IPR protection persisting to be major concerns
New Findings
China is increasingly important for European businesses and the market offers plenty of growth potential: over two-thirds of surveyed companies generate less than 10% of their current global revenue in China, leaving plenty of room for companies to grow their China business
More companies are reporting greater profitability than last year
Companies that have been in China longer tend to be structured as holdings or joint ventures, reflecting the evolving constraints on foreign ownership structures
Smaller companies are more upbeat about future profitability
Two strategies are emerging to combat the talent wars: management localisation (for the large and experienced) versus maintenance of expatriate management (for smaller and newly arrived companies)
Focusing on career planning and development is an important tool for retaining staff and reducing costs
Inflation is playing a growing role in the talent war
Organic growth is preferred over M&A
Small "r" & BIG "D": when European companies engage in R&D in China, they generally focus on the "D(evelopment)" component
CSR programmes are perceived to have a positive impact on recruitment and retention rates
European businesses feel disproportionately targeted when it comes to the enforcement of environmental regulations
Many companies claim that pollution is causing their healthcare costs to rise
Concerns are increasing about protectionism, anti-foreign sentiment and the adverse impact they have on the enforcement of laws and regulations."
