Foreign companies grouse about wages but remain upbeat

09:01, June 30, 2010      

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European companies continue to be bullish on growth in China's market despite showing weaker profits in the country, said a survey released Tuesday by the European Union Chamber of Commerce in China.

All major industry sectors estimated higher business growth this year over last year, according to findings from the European Chamber Business Confidence Survey that surveyed more than 500 European companies based in China.

Roughly 40 percent of the respondents attached more importance to China's market.

However, the survey pointed out fewer respondents reported positive net profit margins this year compared to 2009.

The companies are less concerned about an economic slowdown in light of the strong recovery, but are worried more about rising labor costs and growing competition from domestic players.

Unpredictability of the regulatory environment was also highlighted as one of the main factors affecting foreign invested companies' operation in the market.

Similar findings were announced by the American Chamber of Commerce in the People's Republic of China (AmCham)in its 12th annual Business Climate Survey released in April.

AmCham's report revealed strong overall optimism in China among the US businesses as well as concerns about policies.

But analysts doubt the validity of foreign companies' concerns.

These foreign invested companies' complaints about suffering from unfair policies and deteriorating regulatory environment are not true, said Liu Shengjun, deputy director of the CEIBS Lujiazui International Finance Research Center, based in Shanghai.

Most local governments often provide favorable measures for foreign-invested companies to attract investment, Liu said.

"Rising labor costs are inevitable, given the primary driver of economic growth is currently shifting from exports to domestic demand," he noted.

But Liu said foreign businesses are not likely to pull out as China becomes the world's largest market for just about everything.

Hard figures bear out Liu's claim.

Foreign direct investment inflows rose for the 10th straight month in May, unaffected by recent strikes and pay increases in China's southern manufacturing hub.

Source: Global Times


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