US firms less focused on China

One-in-10 US companies operating in China have removed the nation from their list of top-three priority destinations for global investment in 2013 due to rising labor costs and slower growth, a survey showed on Friday.

The survey, conducted by the American Chamber of Commerce in China, said 68 percent of companies rated China among their top three investment priorities in 2013, down 10 percentage points from last year.

"People are a little bit less focused on China," said Christian Murck, president of the chamber.

The economic slowdown in Europe means it is a good time to make acquisitions. "There is a substantial amount of Chinese foreign direct investment going into the European Union. American investors are also observing these opportunities," he said.

Also, many companies are thinking about the US market amid the ongoing recovery there, and some manufacturing jobs in certain industries are returning to the US.

"Right now energy prices in the US are quite low, particularly natural gas and unconventional oil, so for some parts of the petrochemical industry, the US is more competitive today than it was two or three years ago and it will be more competitive in the future," he said.

US companies still witnessed strong performance in China, with 71 percent posting sales growth in 2012, while 44 percent said the profit margins for their China operations are higher than their global average.

"The attraction of China is still quite high. Maybe in the past, they would say, China is clearly number one, but now they will say, we have a few options and China may be one of the top three," he said.

After seeing negative growth for eight consecutive months, China attracted $8.21 billion in global foreign direct investment in February, up 6.32 percent year-on-year.

Although 78 percent of respondents were optimistic about business in China over the next two years, only 18 percent said they planned to substantially expand their investments in the coming 12 months.

?Rising labor costs and economic slowdown were listed as the top business risks in China. A shortage of qualified employees and managers are also seen as major risks.

"In the fourth quarter last year, we did see lower profits and there was concern about how the Chinese economy was performing. The last several months' data has been more positive," Murck said.

The next few months would be a very important time to see the new leadership's roadmap for development, he said.

Some very positive policy statements have already been made, he added.

For example, the comments made by Premier Li Keqiang and others about inclusive urbanization are very important. "Urbanization will be a long-term positive driver of economic growth and social development," he said.

In addition, Li has said that he hopes to reduce the number of approvals needed for investments by one-third during his first five years in office.

The survey added a number of new questions about Internet usage and cyber security since last year.

About 38 percent of surveyed companies said they are shifting resources or services to cloud computing, up from 31 percent last year.

lanlan@chinadaily.com.cn