Business climate

In the Financial Times on July 1, GE CEO Jeff Immelt was reported to have accused China of being protectionist. On July 17, news reports said that Siemens CEO Peter Loscher had told the premier that foreign companies want equal treatment in bidding for public contracts.

Both CEOs said their remarks were not interpreted in the appropriate context. At the same time, top Chinese leaders including Premier Wen Jiabao, President Hu Jintao and Commerce Minister Chen Deming all expressed that China welcomes foreign investors and promised to offer equal playing fields.

The business climate has been a hot topic in the multinational corporate world ever since, especially with rising competitiveness from Chinese rivals.

Fifty-four respondents in China Daily's survey said they expect foreign investment in China to improve in the next five years. Eight said they expect no change, two said the business climate could worsen and five declined to respond.

Despite complaints from some multinationals, their companies are paying increasing attention to China. And their investments have entered the range of billions, not just millions.

In the survey, all executives but two said they were planning to increase investments in China in the next five years. Twenty said their investments could grow 11-20 percent, and 19 put the growth over 50 percent.

In November, Immelt announced that GE would invest $2 billion in China over three years.

Besides tapping Chinese demand for its products and services, the US industrial giant is partnering with Chinese companies to develop US markets. It has agreed to work with Chinese high-speed railway maker CSR to discuss the possibility of providing high-speed railway solutions in California.

Bauert, with Rio Tinto, said a similar shift is on at his company. China is not only a customer for the mining company, but a supplier of heavy-load trucks and other mining materials, he said.

More important, Bauert said, Rio has joined with China Aluminum Corp to develop iron ore mines in Simandou, Guinea, and to survey copper mines in Guizhou province - helping China find and better use mines at home and overseas. That elevates the relationship from supplier-buyer to partnership, he said.

Time to move?

In spite of their ambitions, the executives surveyed by China Daily said rising labor costs and regulatory uncertainties are two major headaches for them. For 37 respondents, those headaches were ranked as major difficulties.

Thirty-one executives raised the issue of tough competition from domestic rivals while 46 said foreign companies were still their biggest concern.

Some executives said they have to transfer technologies to Chinese companies under their partnership agreements, thus growing their own competitors. But a senior manager with GE China, who preferred not to be named, said he sees the issue differently.

"It's a business issue, so there is no point in complaining after you sign the contracts," he said. "The key is whether we have confidence in our innovation and whether we can grow fast enough to keep ahead of competition. It is an issue everywhere, not just in China."

Since labor costs increased last year, concern has grown that China is losing its charm as a destination for foreign investment. Some international companies are reportedly considering moving plants to cheaper Asian markets.

This follows calls for higher pay at some factories of such overseas investors as Foxconn and Honda in southern China.

But according to the China Daily survey, 76.8 percent of the multinational respondents said they don't plan to move their operations outside China in the next five years even though they feel the pressure of labor costs.

Among all the respondents, 24.6 percent said they would rather move to inland China than to neighboring countries. Only 4.3 percent said they plan to move out of China.

"During the past decades, China has established a comprehensive industrial support capacity that few neighboring countries can match," said Wang Zhile, director of the research center on transnational corporations under the Ministry of Commerce. He said that Chinese workers' high educational level and skills helped make China an attractive place for manufacturing.

Christina C.N. Cheung, director of South China Holdings Ltd and a member of CPPCC from Hong Kong, told China Daily on Saturday that Hong Kong companies have discussed whether it is worthwhile to move operations on the mainland to other regions, and the conclusion was no.

She said the infrastructure and the size of local markets in Southeast Asian countries, which some analysts consider a hot rival to China, are not as good as China's despite rising labor costs.

"I do not see any significant possibility that companies invested by Hong Kong businesses will leave the mainland, unless the labor cost doubles," she said.