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Investing in China, Part I: Harvest Time

By Li Zhenyu (People's Daily Online)

14:19, November 19, 2012

MNCs in China 'bag' increased share of wealth. (Photo/China Daily)

Increased Share of Wealth

With China's huge market and abundant resources, multinational corporations have found a sustained growth engine and witnessed increased share of wealth.

According to statistics from China's Ministry of Commerce, from 2001 to 2010, profits of foreign companies in China increased by an average of 30 percent on a yearly basis, and their cumulative profits reached $261.7 billion during that period.

The international sporting goods brand Nike has been involved in China for over 30 years, with more than 7,000 retail stores established in that country. Its sales surpassed $2 billion in 2011 in the world's most populous nation, making China the biggest market outside the United States for the Beaverton, Ore.-based company.

Wal-Mart, the world's leading retail chain, has maintained double-digit growth in the number of new stores in China during the past few years, with more than 350 supermarkets scattered across over 120 cities in that country. By Dec 6, 2011, the American retailer corporation's sales volume in China had accounted for nearly 10 percent of its global sales, according to Li Ling, Wal-Mart China Senior Director of Corporate Affairs.

"US companies reaped fat profits from China, and they now have more access to join the market and grow with it," said Robert Poole, vice-president of the US-China Business Council's China Operations.

A survey conducted in early 2012 by the American Chamber of Commerce in Shanghai showed that 78 percent of the polled US companies in China were profitable last year, and two-thirds said that their sales growth in China exceeded that of their operations worldwide.

The poll also showed that 80 percent of the companies surveyed registered a year-on-year revenue rise, with 35.7 percent posting double-digit growth.

According to K.C. Fung of the University of California, Santa Cruz, American foreign direct investment reaps returns of 13.5 percent in China, compared with 9.7 percent worldwide.

"For multinational corporations, the return on capital (ROC) in China is higher than that in most other countries. That is the ultimate reason why they flocked to China to invest," Ms. Shi said.

"Besides, foreign investor could not only reap high returns from China's vast market, but also capitalize on China's economic growth in a sustained fashion by establishing sales channels in the market."

"The rapidly growing Chinese market and the country's cheap labor have greatly elevated multinational corporations' global competitiveness and brought them fat profits," said John Duggan, a long-time China watcher and established American attorney.

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