GUANGZHOU, CHINA – March 1, 2016 – The American Chamber of Commerce in South China (AmCham South China) today released its 2016 White Paper on the Business Environment in China and 2016 Special Report on the State of Business in South China.
The 300+ page White Paper, now in its eighth year, presents a highly-researched, exhaustively-cited account of the on-the-ground business environment in China and argues for the nation’s leadership to “Keep moving forward and accelerate the pace” of economic reform.
“I believe that our members are behind President Xi 100 percent, and we are looking forward to seeing where his strong leadership takes the nation in the coming years,” said AmCham South China President Harley Seyedin. “We have seen that Chinese economy has once again defied gravity and is well on its way to full transformation and recovery. It clearly demonstrates a high level of confidence by most companies in the reform policies and the direction and future of Chinese economy. ”
The 2016 Special Report on the State of Business, meanwhile, aggregates and analyzes the experiences of 246 of the companies who participated in the chamber’s annual State of Business Study. This year 75.6 percent of participants reported that their primary business focus was providing goods or services to the Chinese market, while only 24.4 percent reported a primary focus of manufacturing for export.
Roughly 83 percent of participants rank the business environment in South China as “Good/acceptable”, “Very good” or “Outstanding”; meanwhile, 37.6 percent of participants felt the business environment had improved over the past 12 months. Approximately 82 percent of participants reported having hired additional employees to take advantage of the labor market; in total, the chamber estimates that this resulted in its members hiring 993,506 new employees across South China.
Investment budgets appear to be recovering from the slump coincided with the worldwide economic slowdown. The participating companies have increased their reinvestment budgets for 2016 by 8.79 percent. However, we have seen a similar percentage decline in reinvestment budgets over the coming three years, indicating uncertainty in the medium term. AmCham South China member companies stand to reinvest profits amounting to more than $13 billion in 2016.
93 percent of participants reported either being profitable already or expecting to reach profitability within 2 years; of those already profitable companies, however, nearly 43 percent reported that they were not meeting budget expectations for profitability. This discrepancy, says Mr. Seyedin, is likely due to budget expectations only gradually accounting for increased competition in the maturing domestic market.
Among all the participating companies, 38 percent reported interest in investing in the newly announced Free Trade Zones located in South China, and vast majority of them are more likely to choose Free Trade Zones in Guangdong, especially the China (Guangdong) Pilot Free Trade Zone Nansha Area of Guangzhou.
One new question added to this year’s survey is about the influence of “One Belt-One Road” Initiative on company revenue. 37.5 percent of the participating companies expected their revenue to either increase somewhat or greatly. Among those companies, over half of them expected the increase to come from “Asia Pacific” or “Other Asian Countries”, “United States” and “Europe”.
Another question added is about the new “Cross-Boarder E-commerce” Initiative. Among companies have been or plan on being involved in the said initiative, 61 percent reported most of their foreign imports to China come from “United States”. Also top on the rank are “Europe” and “Other Asian Countries”. We also observe there are nearly 85 percent of the participating companies haven’t been involved, not planning on being involved or uncertain about the new initiative. This somewhat indicates great potential in this industry.
When asked about the influence of the Bilateral Investment Treaty (BIT) between U.S. and China on company’s investment budget, nearly 30 percent of the participants expected their budgets to increase, which indicates that they see the BIT as an opportunity for their business development.
In terms of planning and risk management, the biggest perceived challenge to the operations of study participants for the first time ever changed to “Local competition” signaling an alarming concern for equal treatment. Trailing behind in second, third, fourth and fifth places are “Regulatory issues (Chinese government)”, “Rising labor costs” “Lack of qualifiable general personnel” and “Foreign competition”. This indicated that China’s overall regulatory system is improving.
Both documents may be downloaded free of charge from the chamber’s website at www.amcham-southchina.org.
About The American Chamber of Commerce in South China
The American Chamber of Commerce in South China (AmCham South China) is a non-partisan, non-profit organization dedicated to facilitating bilateral trade between the United States and the People’s Republic of China. Certified in 1995 by the U.S. Chamber of Commerce in Washington D.C., AmCham South China represents more than 2,300 corporate and individual members, is governed by a fully-independent Board of Governors elected from its membership, and provides dynamic, on-the-ground support for American and International companies doing business in South China. In 2014, AmCham South China hosted nearly 10,000 business executives and government leaders from around the world at its briefings, seminars, committee meetings and social gatherings. The American Chamber of Commerce in South China is a fully-independent organization accredited by the U.S. Chamber of Commerce in Washington, D.C. All AmChams in China are independently governed and represent member companies in their respective regions.