Should I stay or should I go – The confidence in China seems vague

Business Confidence Survey 2012 carried by European Union Chamber of Commerce in China indicates that European companies are making significant revenues and profits in China though global downturn has influenced their global business performance negatively. The respondent companies of the survey in general seem optimistic on the continued business growth.  However, the obscure regulatory environment is causing frustrations and even considerations of moving investments out of China.

Hmmm, reading the results was quite confusing. Three-quarters of the respondents told that China has increasing importance in their overall global strategy and almost one-quarter said it maintains the same level of importance. However, some 22% of the respondents actually could consider of moving their investments to other regions of the world. The major concerns are the Chinese economic slowdown, increasing labor costs are discretionary enforcement of regulations by government. Nearly half of the respondents felt they had missed business opportunities due to regulatory barriers.

In general, however, the companies are more optimistic on their prospects in China than elsewhere in the world. 63% of the respondents were considering of new investments in Mainland China within 2 years. Ca. three-quarters of professional service providers and same proportion of industrial goods/service companies thought China as one of their top three destinations for the new investments. However, the figure was 59% among the consumer goods/services companies. The companies that had been in the market relatively short time were going to invest heavier in order to gain market share.

In addition to new investments, companies are looking for expansion opportunities into other provinces. This allows business expansion, lower operation costs for example in Middle and West China as well as better government incentives. The number of employed personnel within the companies has been primarily increasing during the past couple of years and the tendency is going to continue.

The survey also implies that Chinese companies have improved in brand recognition as well as marketing and sales. The top investment areas for foreign companies were also branding and sales & marketing. In addition, HR was in the top three areas as the competition for local talents has got severe and skilled people know their value. In order to stay competitive foreign companies have also been cutting down their expenses and reduced their prices. After all, most companies are nowadays in China to serve local clients.

Some time ago I read from a newspaper that the CEO of Rovio, the company behind Angry Birds, said that their success relies on the fact: “we Finns are so good in selling”. That was of course a sarcastic comment since we Finns are generally known for our other virtues. However, Rovio has understood how to play the game in China. Invest in branding; adapt the products/services into the local market; sell aggressively while developing new services. Yet, it doesn’t make any harm to invest in government relationships in order to pass through the barriers. If you’ve got what it takes – guts, creativeness, and the right mixture of resources – stay.

Original survey is found in

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