Most U.S. Firms In China Primarily Serve Domestic Market

August 31, 2006 | Print | Email Email | Comments | Category: News

The U.S.-China Business Council's annual member survey reveals that U.S. companies are optimistic about their China operations even as they face old and new hurdles to operating in the Chinese market.

81% of companies say that their Chinese operations are profitable, a significant increase from a U.S. government survey in 1999. More than half say that profitability rates for their China operations meet or exceed their company's global profit margins.

Most U.S. investment in China is in 100% U.S.-owned enterprises, not joint ventures with Chinese partners. This trend has developed steadily with China's market openings. Nearly 75% of new foreign investment is now in wholly foreign-owned enterprises.

USCBC companies primarily invest in China to serve the Chinese domestic market, not export back to the United States, and 57% of the respondents said that their main investment objective was to access the China market. Only 18% invest in China as an export platform to the U.S. market.

The survey also reveals that the top operating concern this year is not a policy issue, but rather it is human resources. The shortage of experienced and skilled local executive talent, especially in middle management ranks, is a persistent and growing problem for U.S. companies.

"U.S. companies have made significant gains in China, thanks in part to China's World Trade Organization entry and other market openings," said USCBC President John Frisbie. "But a shortage of skilled managers, problems with licensing and business approvals, inadequate intellectual property protection, and a general lack of transparency are among the hurdles U.S. companies still face as they try to act on these market openings."

Intellectual property rights protection is still a top issue, but getting business licenses and government approvals has emerged as a more immediate concern. Companies run into licensing issues as they seek to act on WTO openings in sectors such as construction, financial services, distribution, and product licenses.

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