Shang­hai named best city for US busi­nesses

China Daily (Canada) - - SHANGHAI - By YU RAN in Shang­hai

yu­ran@chi­nadaily.com.cn

US com­pa­nies have iden­ti­fied Shang­hai as China’s most at­trac­tive city for for­eign busi­nesses de­spite a num­ber of them ex­pe­ri­enc­ing lower rev­enue growths due to China’s eco­nomic slow­down, ac­cord­ing to sur­vey re­sults in the Amer­i­can Cham­ber of Com­merce Shang­hai’s 201516 China Busi­ness Re­port.

The re­port re­vealed that 70 per­cent of the 406 com­pa­nies sur­veyed have plans to make in­vest­ments in Shang­hai.

The re­port, which is based on the re­sults of AmCham Shang­hai’s 2015 China Busi­ness Cli­mate Sur­vey, is of the long­est run­ning ones fo­cus­ing on US busi­nesses in China. It poses ques­tions about com­pany per­for­mances, chal­lenges and strat­egy, fu­ture risk out­looks, busi­ness dis­rup­tion and trends.

US com­pa­nies in China have gen­er­ally been faced with slower de­vel­op­ments as only 61 per­cent of them in Shang­hai re­ported rev­enue growth for 2015. The num­ber of US com­pa­nies in China with de­clin­ing rev­enues more than dou­bled in 2015, ris­ing from 11 to 23 per­cent. Seventy six per­cent of the com­pa­nies es­ti­mate that they will ex­pe­ri­ence rev­enue growth in 2016, but most ex­pect it to be below 10 per­cent.

“The year of 2015 was a chal­leng­ing year for busi­nesses in China. Amer­i­can com­pa­nies need to ad­just to this new set­ting but also to the op­por­tu­ni­ties that re­main, such as in ser­vice sec­tor growth,” said Ken Jar­rett, pres­i­dent of AmCham Shang­hai.

Sixty-four per­cent of the com­pa­nies say that a drop in China’s GDP rate and the slow­down of econ­omy will mod­er­ately or sig­nif­i­cantly af­fect their busi­nesses, while only 8 per­cent say that it will have no im­pact. The re­port also showed that costs, do­mes­tic com­pe­ti­tion and the eco­nomic slow­down are seen as the key risks for 2016.

Rev­enue growth and in­vest­ment lev­els in the man­u­fac­tur­ing sec­tor are slow­ing the most dra­mat­i­cally. Man­u­fac­tur­ers are also send­ing mixed sig­nals about the slow­down — 39 per­cent of them iden­tify slower mar­ket growth as the top risk fac­tor in ex­pand­ing their busi­nesses in China, while 18 per­cent be­lieve that over­ca­pac­ity caused by mar­ket over­heat­ing was the main cul­prit.

“The man­u­fac­tur­ing sec­tor in China is not do­ing well and is un­der sig­nif­i­cant chal­lenges. We have to squeeze the mar­gin as our prices are de­clin­ing rather than in­creas­ing,” said Ce­cilia Ho, pres­i­dent of In­ter­na­tional Pa­per In­vest­ment (Shang­hai) Co Ltd.

With re­gard­ing to lo­cal com­pe­ti­tion, 78 per­cent of the Amer­i­can com­pa­nies sur­veyed say their busi­nesses have faced in­creased com­pe­ti­tion from Chi­nese pri­va­te­owned en­ter­prises, up from the 67 per­cent in 2014.

“More lo­cal com­pa­nies are hir­ing for­eign cre­ative to give them­selves a multi­na­tional di­men­sion and raise their level of so­phis­ti­ca­tion. This is some­thing multi­na­tional com­pa­nies have to be aware of,” said Paul Lin, chief strat­egy of­fi­cer of Pos­si­ble, a cre­ative dig­i­tal agency.

On the other hand, com­pa­nies in the retail and ser­vice sec­tors are among those who are op­ti­mistic about the fu­ture. Retail has re­mained the most bullish sec­tor, with 91 per­cent of com­pa­nies propos­ing in­vest­ment in­creases for 2016, while 85 per­cent of com­pa­nies in the ser­vice sec­tor are look­ing to do the same.

“Over­all, the sur­vey re­sults tell the story of China’s trans­for­ma­tion from an in­dus­trial ex­port-based econ­omy to an in­creas­ingly ser­vice-ori­ented one. This is a trend we ex­pect will act as a bea­con to at­tract more Amer­i­can firms into the mar­ket,” said Ron Klein, prin­ci­pal at PwC Strat­egy&.

Em­brac­ing e-com­merce and dig­i­tal trends are the two big­gest pri­or­i­ties among US com­pa­nies for 2016, with 47 per­cent say­ing they will in­crease their in­vest­ments in th­ese ar­eas. How­ever, over­all in­vest­ment in dig­i­tal ini­tia­tives and on­line chan­nel de­vel­op­ments in China re­mains low.

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