Wholly owned foreign enterprises operating in the mainland are more profitable than joint ventures, according to a report by global management consultant ATKearney.
In a survey of 70 companies - encompassing 229 mainland projects either wholly owned or joint ventures - 62 per cent of wholly owned foreign enterprises were more profitable compared with 42 per cent of joint ventures.
However, most respondents recognised that capitalising on local talent was key to improving profitability.
Unprofitable firms had four expatriates to every five local managers and profitable companies had a 1:2 ratio of expatriate to local managers, the survey showed.
Richard Miskewicz, vice-president of ATKearney's Hong Kong office, said overly optimistic demand estimates, mounting competition and human-resource challenges meant more than 33 per cent of foreign multinationals were unprofitable and 25 per cent were only managing to break even.
'The emergence of local competition is one of the most significant changes in China's business environment of the last two years,' Mr Miskewicz said.
