According to a survey by professional services organization
Deloitte
Touche Tohmatsu and CFO Asia magazine, transnational
corporations see China as a key world growth market despite global
economic recession.
Some 90 percent of senior executives at foreign companies in China
confirmed plans to expand operations in China over the next three
years. The survey included responses from 680 companies from Asia,
Europe and North America, which invest annually US$4.5 billion in
China.
"Most of the companies listed in the survey regard China as a
highly challenging but potentially hugely rewarding market. They
are grasping the moment to start their businesses and expand their
operations in China," said Jim Orr, Asia-Pacific tax managing
partner of Deloitte Touche Tohmatsu.
Ninety percent of international companies already operating in
China intend to invest in expanding their business, according to
the survey. Sixty percent of companies not yet operating in the
country see China's mainland as a great important market within the
next three years. Almost two out of three companies will expand
their manufacturing line, and some other companies extend their
business in different areas. Some companies plan to reduce and
expand their business simultaneously to regroup and optimize their
investment structure. Beijing, Shanghai, Guangzhou and Shenzhen
have become their first chosen cities for investment in China.
The Asia-Pacific region has the most optimistic outlook toward
investing in China, with almost all companies planning to expand
their business operations in China in the next three years. Almost
90 percent of European companies and 80 percent US companies plan
to do the same.
Companies in the survey believe that they will face four challenges
in starting or expanding their investment in China after China's
entry into WTO.
The first challenge is in operating. The companies saw China's
legal environment as a major obstacle in business operating.
Swindling and infringing on others' rights is the biggest risk.
Companies with operations in China are more concerned about the
pace and extent of China's implementation of its WTO commitments.
And companies in the area of finance and telecom are more concerned
about regulation of the industry.
Financing is the second key challenge. Since China's financial
institutions are not yet a source of financing, almost half of the
companies plan to finance their expansion internally. Nearly one
out of four companies put in only the capital they needed through
China's financial institutions. Two out of three companies intend
to borrow money from foreign financial institutions and China's
institutions at the same time. More than one in ten companies will
establish joint-venture companies, and go public in the domestic
market, especially the telecom and financial companies.
The third challenge is restructuring. Foreign companies are
re-evaluating their structure and business models to take advantage
of the business opportunities after China steps up its opening to
the outside world. Ninety percent of companies will expand their
investments through widening their business scope, increasing their
equity in joint ventures, establishing new enterprises, and merging
enterprises. The majority of respondents plan to re-evaluate their
business models and structure. Almost 30 percent of companies said
they intended to increase their equity and control of joint
ventures.
The fourth key challenge is human capital. Finding local talent is
particularly important among the international companies already
operating in China. Two out of three companies plan to attract more
local talent, and expect that recruiting and retaining talent will
become more difficult. One in three companies intend to reduce the
number of foreign executives at senior positions, but professional
service companies favor them in senior positions.
(新華社[Xinhua News
Agency], by Ye Guobiao, translated by Shan Xingmei for
china.org.cn)