AmCham Members with existing operations in South China to reinvest more than US billion to expand & capture additional Chinese market share
The American Chamber of Commerce in South China released the 2008 results of its annual study of the regional business environment, The 2008 Special Report on the State of Business in South China, yesterday in Guangzhou, South China.
This year's study, conducted by AmCham South China in partnership with Hewitt Associates, collected the experiences and insights of 419 international and local companies in Guangdong, Guangxi, Fujian, Hainan and beyond！compared to 364 respondents in 2007 and 161 in 2006！and indicates a high level of satisfaction with and optimism for the business environment in South China.
"I believe that the most important thing about this report," said AmCham South China President Harley Seyedin, "is that it is only the broadcast medium for a message coming directly from the international business community. That message, as in 2006 and 2007, is that the state of business in South China remains excellent."
Senior executives of AmCham South China present at the press conference for the report release in Guangzhou, China on April 8. (AmCham South China)
90% companies profit
Illustrative of this trend, nine out of ten participating companies indicated that they were already profiting, or would be within two years or less, and vast amounts of these profits are reported as being reinvested in China, with approximately 23 percent of companies indicating that they plan to invest in excess of 50 million U.S. dollars in China over the coming three years, and half of that number planning to invest in a quarter of a billion U.S. dollars or more！each！in that same timeframe. Applying these numbers to AmCham South China's 1,200 members yields an estimated 16 billion U.S. dollars to be reinvested by AmCham companies in South China over the next three years.
Among the more than 400 participants in the study, the overall business environment in South China received an 87 percent approval rating, with more than 90 percent reporting that economic reforms in 2007 had at least some positive effect on their business operations.
Additionally, this year 57.5 percent of participants reported that their main focus was providing goods or services to the South China market rather than exporting from China！compared to 50.1 percent in 2007 and 46 percent in 2006！describing a trend that is not only consistent with development goals for China articulated in the 17th Party Congress and 11th 5-Year Plan, but also speaks of a vibrant and affluent domestic economy in South China.
The top reasons for companies to set up operations in South China instead of other regions of China also mirrored responses from prior years: positive support from and greater openness in regional governments, opportunities in the South China market, proximity to Hong Kong as well as logistical, infrastructure and transportation advantages continue to be compelling reasons for choosing South China.
Finally, while regulatory changes by the Chinese government continued to be listed as the biggest challenge to future business growth in South China, the specific issues noted were unanimously national-level developments and not regional or local ones. Furthermore, despite the manufacturing sector being hit in mid-2007 by major, and in some cases exceedingly disruptive, changes to VAT rebate policy and processing trade regulations, fewer than 10% of respondents indicated that these changes had a "significantly negative" effect on their business operations！fewer, in fact, than those who reported a "significantly positive" effect.
"This is a business environment," wrote Mr. Seyedin in his President's Report, "that is continually fine-tuning and realigning itself to take advantage of new opportunities and reach goals that will benefit not only the many peoples of South China, but also its trading partners the world over."
AmCham South China President Harley Seyedin addresses the report release in Guangzhou, China on April 8. (lifeofguangzhou.com)
The Labor Contract Law helps economy transform to sound being
As to the cost rise of human resource due to the new Labor Contract Law, Mr. Seyedin thought it inflicted more impact on the labor-intensive and non-environment-friendly companies. These companies are likely to move out to other countries with cheaper labor cost than China's and industries in China could be transformed to higher level and sound development.
The Amcham's statistics shows some foreign investors set up R & D centers in South China, instead of factories as before.
He expected Guangzhou and Shenzhen would lead South China to the orientation of software and high-extra-value industries.
As for the RMB appreciation, Mr. Seyedin regarded it was positive as the appreciation was Chinese government's approach to control inflation, the bigger concern and woe for foreign companies than RMB appreciation.
The press conference for the report release in Guangzhou, China on April 8. (lifeofguangzhou.com)
Advice: different labor regulations according to different occupations and regions
However, he suggested the new Labor Contract Law could be improved as different labor regulations could be enacted according to different occupations and regions of the nation.
An adequate transitional period be given, not a sudden change, for foreign-funded enterprises to adapt to the policy changes, he said.
Mr. Seyedin also said AmCham would submit its second suggestion package of economy to Chinese administration in two weeks.
(By Ronald Li)
