Apr 2, 2013

China - US firms less focused on China

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One in 10 US companies operating in China have removed the nation from their list of top-three priority destinations for global investment in 2013 due to rising labour costs and slower growth, a survey showed on Friday.

The survey, conducted by the American Chamber of Commerce in China, said 68 per cent of companies rated China among their top three investment priorities in 2013, down 10 percentage points from last year.

"People are a little bit less focused on China," said Grey Gilligan, chairman of the chamber.

The economic slowdown in Europe means it is a good time to make acquisitions. "There is a substantial amount of Chinese foreign direct investment going into the European Union. American investors are also observing these opportunities," he said.

Many companies are also thinking about the US market amid the ongoing recovery there, and some manufacturing jobs in certain industries are returning to the US.

"Right now, energy prices in the US are quite low, particularly natural gas and unconventional oil, so for some parts of the petrochemical industry, the US is more competitive today than it was two or three years ago and it will be more competitive in the future," he said.

US companies still witnessed strong performance in China, with 71 per cent posting sales growth in 2012, while 44 per cent said the profit margins for their China operations are higher than their global average.

"The attraction of China is still quite high. Maybe in the past, they would say, China is clearly number one, but now they will say, we have a few options and China may be one of the top three," he said.

After seeing negative growth for eight consecutive months, China attracted US$8.21 billion in global foreign direct investment in February, up 6.32 per cent year-on-year.

Although 78 per cent of respondents were optimistic about business in China over the next two years, only 18 per cent said they planned to substantially expand their investments in the coming 12 months.

Lan Lan

China Daily

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