China is coming of age as an important market for multinational
companies, and the process is changing the business opportunities
and strategies of companies that do business in many countries.
This is the conclusion of a research report released Thursday by
the Economist Intelligence Unit (EIU), an information service arm
of the Economist Group.
A survey was conducted in March and April this year of 217
senior executives from multinationals with operations in China. The
survey included all major industries, including automobiles,
finance, logistics, pharmaceuticals, retail and
telecommunications.
Most foreign companies came to China in the late 1990s believing
it was a huge market with 1.3 billion consumers, but were
disappointed, said Robin Bew, EIU's chief economist. "But now, the
country is indeed a huge consumer market, with 100 million people
having purchasing power."
Multinationals have been increasing sales and improving
profitability in their Chinese operations, he said. Improved
infrastructure and policies have made the market more accessible to
the big overseas companies.
As a huge market with strong demand, more foreign companies are
viewing China as a strategic location for their global development,
said Paul Cavey, EIU's chief China economist.
More than half of the executives surveyed believe the Chinese
market is key to their global strategy, and 41 percent think China
is of strategic importance to them.
However, the multinationals are also facing great challenges. In
the 1990s, competition was rare in many fields, but today it is
becoming more intense. Large, medium and small companies from
Europe and the United States, firms from other Asian markets, and
domestic enterprises are all competing for slices of the China
pie.
Market shares held by multinationals are decreasing in many
sectors, such as the auto industry, because of the rapid growth of
local companies, Cavey said. He admitted, however, that
multinationals might have monopolized a few markets.
In dealing with the changing operating environment, the
multinationals are exercising their strengths in brand building and
marketing, and cutting operation costs through comprehensive
localization. Merger and acquisition activities have soared in the
past two years.
(China Daily June 4, 2004)