Healthcare still seen as golden goose for American companies
American healthcare companies are more confident of prospering in China than any other industry from the US due to Beijing’s policy priorities, China’s growing middle class and continued urbanization.
Despite this level of optimism their five-year outlook has been tempered by the economic slowdown, according to the 2015 China Business Report released by the American Chamber of Commerce in Shanghai on March 4.
“Population growth and the emergence of a richer middle class will enlarge our market based on their increased demand for high-quality medical treatments over the next five to 10 years,” said Shirley Zhao, president of Allergan. The US healthcare giant has been in China for over two decades.
The report is based on the results of AmCham Shanghai’s annual China Business Climate Survey, which has been reflecting the views and insights of 377 American corporate executives for the last 16 years.
Nearly one-third of US companies surveyed named China as their top global investment priority and 96 percent either maintained or increased their investment here last year.
Two-thirds forecast greater China investments for 2015 while 28 percent plan to maintain the status quo, leaving only a tiny fraction that expects to tighten their corporate belts.
“Competition is becoming more intense and China’s economy is slowing down, but even at the current GDP growth rate China will continue to offer many opportunities to American businesses,” said Kenneth Jarrett, president of AmCham Shanghai.
China saw strong foreign investment inflows in the first two months in 2015, data released by the Ministry of Commerce show.
The country attracted $19.3 billion, up 10.4 percent from the corresponding period in 2014. Investments from the US alone jumped 43 percent on-year.
“Companies from industries like healthcare, IT, automobiles and consumer goods are growing rapidly with their rising optimism in the China market,” Jarrett said.
Like last year, rising costs remain their top challenge. Over 90 percent put this as their biggest headache in the report, with escalating Chinese labor costs at the head of the list.
“Many foreign companies in China are starting to find themselves stuck between a slowing economy and a stillchallenging commercial environment,” said Kent Kedl, managing director for greater China at Control Risks, which helped produce the report.
The report showed that US companies are increasingly concerned about the direction of China’s economic reform and its potential impact on foreign businesses, particularly in addressing long-standing market access and regulatory obstacles.
Meanwhile, domestic competition from State-owned and private Chinese companies continues to impede the success of US companies, with respondents citing this among their three big concerns.
“To obtain success in China facing fierce competition from local enterprises, which no longer compete on price alone but with higher-quality products, we need to design more innovative items and offer better services for the China market to stand out,” said James Michaelson, a director of international finance at Corning.