U.S. companies continue to see strong growth and profitability in China, finds the 2012 China Business Environment Survey released by the US-China Business Council (USCBC).
"Two-thirds of companies surveyed said revenue from their businesses in China grew by 10 percent or more in the past year," says USCBC President John Frisbie.
The study finds that 75 percent of respondents said profit margins from their China operations were the same as or better than their company's global margins.
"Despite market growth, company optimism is tempered by rising costs, domestic competition, and continuing regulatory and market access barriers," Frisbie said.
"Although 90 percent of respondents said they are optimistic or somewhat optimistic about business prospects over the next five years, a sizeable number—45 percent—said they are less optimistic than three years ago."
Companies' top 10 challenges are related to both daily business operations and government policies.
Talent recruitment and retention remained the top challenge for American businesses in China while administrative licensing hurdles—the ability to obtain business licenses—ranked second.
Though cost increases ranked fourth, companies said these increases were the number one restraint on profitability growth.
Competition with Chinese enterprises (state-owned or private), cost increases, and uneven local enforcement and implementation of laws and policies remain top challenges. Inadequate protection of intellectual property rights also remains a top concern, although survey respondents noted a slight improvement over the past year.
"The issues raised by the survey are areas where USCBC will continue to engage the Chinese government so American companies can compete on an equal footing," Frisbie said.
USCBC estimates that China is a $250 billion market for American companies. Fully 94 percent of companies report that they are doing business in China primarily to access the domestic Chinese market, not develop an export platform.
The survey reveals, once again, that the Chinese exchange rate does not impact US company competitiveness in China, compared to other market access issues.
"The exchange rate issue failed to make the top 25 issues again this year," Frisbie said. "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."
The top 10 challenges cited by USCBC member companies:
1. Human resources: Talent recruitment and retention
2. Administrative licensing
3. Competition with Chinese enterprises (state-owned or private)
4. Cost increases
5. Intellectual property rights enforcement
6. Uneven local enforcement and implementation of laws and policies
7. Investment restrictions
8. Competition with foreign companies in China
9.Competition with foreign or Chinese companies not subject to US Foreign Corrupt Practices Act
10. Standards and conformity assessment