AmCham report: Business environment healthy, second- and third tier cities the future

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AmCham Shanghai recently released their 2007 China Business Report, a survey of AmCham’s corporate members and their experiences operating businesses in China.

With one-third of all respondents having done business in China for 1o—20 years and seven percent for more than 20 years, the American companies that provided information for the report have significant experience operating on the mainland.

Some highlights from the survey:

Strong financial returns

  • 88 percent of respondents reported slightly or substantially increased revenue from the China operations in 2007 as compared to the previous year
  • 92 percent or respondents felt the business climate for US businesses in China had improved over the past three years
  • 86 percent of respondents are optimistic or slightly optimistic for their five-year China outlook
  • 90 percent of respondents expect a rise in 2008 revenue over 2007

Expansion into second-and third-tier cities

  • In 2008, 25 percent of respondents said they are likely to expand beyond their current locations into second- and third-tier cities, primarily for increased market reach
  • The top five second- and third-tier destinations were Chengdu, Nanjing, Dalian, Wuhan and Xi’an

Top challenges

  • The top five challenges facing the respondents were: human resources constraints; unclear regulations, inconsistent regulatory interpretation, lack of transparency and bureaucracy; visa difficulties; and intellectual property rights
  • Over 65 percent of respondents reported a negative impact on business operations in China because of difficulty attracting, developing and retaining skilled, technical and managerial staff
  • IPR protection has either stayed the same or improved according to the vast majority of respondents (49 and 50 percent respectively)
  • 76 percent or respondents agreed that China is losing its competitive advantage due to rising costs

The survey drew from the experience of 270 AmCham corporate members in an online survey over September and October.

In regards to expansion into second- and third-tier cities, China Briefing has been looking inland for quite some time, with specific issues dedicated to second tier cities, the Go Inland campaign and the Go West campaign. For 2008, the magazine will run a special feature looking at some of the less known second- and third-tier cities in China. In January, we focus on Shijiazhuang, Changzhou, Dongguan, Changsha and Xining.