89% of US firms in China 'profitable'

Updated: 2012-10-10 11:17

By Tan Yingzi in Washington (China Daily)

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Amid slow growth in much of the world, China remains a bright spot for US companies, with nearly nine out of 10 that do business in the country turning a profit in 2011, according to a survey issued on Wednesday.

Two-thirds of companies interviewed by the US-China Business Council said revenue from their operations in China grew by 10 percent or more in the past year. Three-quarters said profit margins from China operations were the same as or better than their company's overall margins.

The Washington-based council represents about 240 US companies selling goods and services in China, including nearly all US-based multinational corporations.

The figure of 89 percent of US companies reporting a profit from business in China was the highest total since the council in 2006 began surveying its member companies for its annual China Business Environment Survey. The report is a gauge of business conditions and challenges in what has become the world's second-biggest economy.

According to the USCBC, China is a $250 billion market for US companies. Fully 94 percent of companies report that they're doing business there mainly for access to the Chinese market, not to develop an export platform, the report said.

According to the US Trade Representative's Office, China was the third-biggest market for US exports in 2011, totaling $103.9 billion, up 13 percent ($12 billion) from the previous year, and 539 percent higher than in 2000. US exports to China accounted for 7 percent of all US exports in 2011.

"Despite market growth, company optimism is tempered by rising costs, domestic competition, and continuing regulatory and market-access barriers," USCBC President John Frisbie said.

"Although 90 percent of respondents said they are optimistic or somewhat optimistic about business prospects over the next five years, a sizable number - 45 percent - said they are less optimistic than three years ago."

Recruitment and retention of employees remains the top challenge for US companies operating in China, while the ability to obtain business licenses ranks second. Competition from Chinese companies, both State-owned and private, comes in third.

Though "cost increases" is the fourth-most-cited challenge in the survey, companies said they were the main constraint on their ability to increase profits.

Other challenges included enforcement of intellectual property rights, uneven local enforcement and implementation of laws and policies, and investment restrictions.

Despite rhetoric during the US presidential campaign, the Chinese government's policies on currency and exchange rates again was not one of the top 25 of challenges cited in this year's council survey, suggesting that the issue is not seen as curbing US companies' competitiveness in China.

Some US lawmakers and economists have criticized China of deliberately undervaluing the yuan currency to reduce the cost of exporting Chinese goods and thereby gain an unfair advantage in foreign markets.

Republican presidential challenger Mitt Romney has said he would label China a currency manipulator on his first day in office if elected, and recently cited as part of his economic-recovery plan "confronting nations like China that cheat on trade and steal American jobs".

"This is a clear reminder to all US-China commercial stakeholders that we need to focus on the issues that matter most and develop effective solutions to the top challenges facing American companies doing business with China," Frisbie said.

The yuan has appreciated 40 percent against the dollar after adjusting for inflation since China initiated currency reforms in July 2005, according to the US Treasury Department.

The US-China Business Council advised US companies, government officials and other "stakeholders" to engage with China's government and address problems through established mechanisms such as dispute-settlement bodies in the World Trade Organization.

"Developments in the US-China relationship have proven that direct engagement with China and close coordination with other trade partners produces meaningful results on issues that impact US workers and businesses," the council's report said.

The two countries have been conducting a number of high-level exchanges on economic and trade matters, including the annual Strategic and Economic Dialogue and the Joint Commission on Commerce and Trade.