China - Investment in China set to increase

GUANGZHOU - Members of the American Chamber of Commerce in southern China plan to invest more in China in the coming years despite a sluggish global economy, according to a survey published on Tuesday.

The survey, which interviewed 461 companies, said the members' budgets call for increasing their spending in China by 21.4 per cent for the next three years.

The survey polled businesses in Guangdong, Fujian and Hainan provinces, as well as the Guangxi Zhuang autonomous region and Chongqing. Many small and medium-sized businesses took part in it this year.

The chamber estimated that the nearly 2,000 members will spend about US$11.7 billion (S$14.6 billion) in the next three years to expand their businesses in China, said Harley Seyedin, chairman of the chamber, at a press conference.

Those plans were an about-face from the budget figures reported in the survey for last year.

In that report, the chamber's members said their budgets called for their investments in China to decrease by about 8 per cent over the course of three years.

About 57 per cent of the companies in the survey this year say their 2011 budgets call for investing more in China.

About 88 per cent of the companies surveyed say they are already profitable or expect to make a profit in two years, and about 70 per cent of the already profitable companies said they expect to meet or exceed their profit targets.

Seyedin said it is hard to explain exactly why the companies intend to invest more in the next three years. Two likely reasons are the absence of a large number of investment opportunities in the rest of the world and the room for growth in the Chinese market.

"They are very successful companies ... but still have a small share of the (Chinese) market," he said.

About 70.5 per cent of the companies surveyed mainly provide products or services to the Chinese market, compared with fewer than 23 per cent in 2003, when the first informal survey of this kind was conducted.

Companies' plans to spend more indicate their expectations for the coming few years, said Zuo Liancun, a professor with the Institute of International Economy and Trade at Guangdong University of Foreign Studies.

"I think the eurozone debt crisis is easing although it is not over yet," Zuo said. "With the measures taken by countries around the world, the global economy will take a turn for the better in the coming three to five years. I am rather confident that there is little chance of a second dip."

The Guangdong branch of TUV Rheinland, a third-party testing, inspection and certification firm, reported that its revenue had increased by 13 per cent last year, reaching nearly 200 million yuan (S$39.7 million), said Holger Kunz, vice-president of TUV Rheinland Greater China and managing director of TUV Rheinland South China.

The company's operation in Guangdong sustained a large blow in 2008 when the province, whose economy relies heavily on exports, was hit by the global financial crisis.

The company has since diversified its business to seek more new-energy and high-tech clients and to provide customised solutions.

Its growth turned positive in 2009 and this year is set to be the company's best, Kunz said.

"The Chinese market has great potential and Guangdong is changing its mode of development step-by-step," he said.

About 85 per cent of the companies surveyed rated business conditions in South China as being "outstanding", "very good" or "good/acceptable".

The top reason they had for moving to southern China remained the good market opportunities they found there, followed by the proximity to Hong Kong, as well as the presence of high-quality managers and specialists and better infrastructure there.

The companies, meanwhile, pointed to regulation as being the single largest obstacle they faced to doing business.

Li Wenfang

China Daily/Asia News Network

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