1970-01-01 08:33:28
A latest survey by the European Chamber of Commerce in China shows that European small and medium sized enterprises are optimistic for their prospect of success in China operations.
The Chamber released its fifth business confidence report on Nov.25 in Beijing. Seventy percent of the respondents are SMEs. They regard their operation in China as a crucial part of their long-term strategy.
A majority of the respondents --- either business giants or SMEs ---are "in China, for China". That can explain why the decreasing demand in the EU and US markets due to the global financial crisis has not directly affected European businesses in China which are more China market oriented rather than export oriented. This is according to Mr. Joerg Wuttke, the Chamber president who spoke at the press conference for the release of the report.
Most of the SMEs are new comers. Only 25 percent of them have been in China for over ten years. The longer a company has been in China, the more successful they are. Ninety percent of the companies operational in China for over 20 years are doing quite well in their profitability. Only a quarter of those doing business in China for less than two years can make profit. That may be caused by the massive costs involved in the initial stage.
SMEs, albeit weaker than their larger counterparts, are more confident regarding their future in China. Fifty-three percent of SMEs are very optimistic, whereas only 16 percent of big ones are. Forty percent of SMEs which have not made profits expect a profitable 2008.
Of all the respondents, 70 percent are optimistic about their profitability prospect in China, compared with 61 percent in a 2007 survey. As a matter of fact, more than three quarters of all respondents have seen their revenues increase significantly. Since 2005, more than half of the respondents have enjoyed a 20 percent rise in their annual revenues.
However, as the survey was conducted between June and early September, the impact of the global financial crisis is probably not reflected. The biggest concern for European companies in China now is the possible further slowdown of China's economy. But Mr. Wuttke believes that China market will be increasingly important for European investors because other economies will be even slower than China.
Mr. Wuttke recognized that European businesses are facing mounting pressure from their Chinese competitors on the China market. "Chinese companies are getting better and smarter," he told People's Daily Online, adding that competition is good for consumers. The advantage for European companies, according to the findings, is the quality and design of their products.
Mr. Wuttke pays much attention to the real estate sector in China because much European equipment is used in the construction of buildings and by home owners. He hopes that European companies can benefit from China's multi-trillion yuan economic stimulus packages declared recently by the central government and followed immediately by local governments.
Another important concern of the European companies in China is the transparency of the law enforcement. Many complain that the enforcement varies at local levels and that foreign companies are facing stricter implementation of environmental laws than their local peers. Mr.Wuttke thinks that is also related to local protectionism.
Looking to the future, most companies still plan to invest in big cities. Although most of them know that less developed areas will be the driving force of the whole economy, they hesitate going there due to a possible lack of infrastructure and talent.
Mr. Wuttke has also noticed the changing business model in China's most important engines, that is, the eastern coastal areas like Shanghai and Dongguan. He is paying close attention to that change because many exporters there are clients of European companies.
However, China business only accounts for 10 percent of the global business of those respondents. And only twenty percent of the 1,400-plus Chamber members are SMEs. That means there is still great potential for European companies, particularly SMEs.
By People's Daily Online