US firms less upbeat about China

PUBLISHED : Thursday, 16 February, 2012, 12:00am
UPDATED : Thursday, 16 February, 2012, 12:00am


United States businesses, facing rising production and labour costs in China, are feeling less optimistic about their business outlook in the world's second-largest economy.

Rising costs topped the list of business challenges facing US firms, according to a survey by the American Chamber of Commerce (AmCham) in Shanghai.

More than 90 per cent of the 315 survey respondents said higher costs were holding back their businesses on the mainland. 66 per cent were having to pay more to keep skilled workers and were also feeling price pressures due to inflation.

'It is clear that US companies in China have come to expect challenges, have weighed them against the opportunities, and have found a way to succeed in China despite them,' said Kenneth Jarrett, chairman of AmCham Shanghai.

The mainland's producer price index rose 6 per cent last year, eating into US company profits, and they had to raise salaries to retain experienced workers.

72 per cent of employers on the mainland offered a pay rise of more than six per cent last year, and an additional 18 per cent gave a pay rise between three and six per cent, according to a survey by British recruitment firm Hays.

The AmCham survey said 51 per cent of firms reported increased profit margins last year, down from 66 per cent in 2010.

China has been a bright spot for US firms as they chased rapid business growth in the world's most populous market.

However, US businesses report seeing little improvement in China's regulatory environment, citing the bureaucracy and a lack of transparency as stumbling blocks.

Beijing has required foreigners working on the mainland to join the local pension system, costing Shanghai-based employers an extra 4,300 yuan (HK$5,300) for each expatriate employee, which is supposed to be paid to the social security account.

But US firms remain committed to China because of its huge potential. About two-thirds of US firms said revenue growth in China outpaced their global operations.

Overall, 86 per cent of respondents maintained a positive five-year outlook for the China market, the Amcham survey showed.


This percentage of AmCham respondents plan to increase investments in China this year, up from last year's 72 per cent