NEW YORK: Revenue growth slowed for United States-based companies in China last year, though a large number of them managed to remain profitable, a new report said.
According to the American Chamber of Commerce Shanghai’s 2015-16 China Business Report, though 71 percent of the US companies were still in the black, only 61 percent reported revenue growth for 2015. The number of US companies in China with declining revenues more than doubled in 2015, from 11 to 23 percent. About 76 percent expected revenue growth in 2016, but mostly below 10 percent.
Retail seems to be the most promising sector, with 91 percent of the companies planning more investments in 2016. About 85 percent of the respondents were keen on enhancing investments in the services sector.
“2015 was a challenging year. American companies need to adjust to the new setting and also be prepared for the ensuing opportunities, such as in the services sector,” said Ken Jarrett, president of AmCham Shanghai.
Costs, domestic competition and the economic slowdown are seen as key risks for 2016, with about 64 percent of respondents saying that a drop in China’s GDP rate will moderately or significantly affect their company. About 8 percent felt that the GDP growth rate will not have any impact on their plans in China.
“It is very difficult to make money in the manufacturing sector, so we need to work really hard to do cost controls on a daily basis and do more in terms of customer strategy and opportunities for revenue growth in an extremely competitive and oversupplied environment,” said Cecilia Ho, president of International Paper Investment (Shanghai) Co Ltd.
“We have to develop customers by looking for winners in the segment, which will allow us to grow and retain the development, and to stand out from competition.”
In addition, competition from local privately owned companies is viewed as the number one threat to US companies over the next five years. The US companies continue to maintain the view that government bodies do not treat local and foreign businesses on a level platform.
“We see that regulatory reform is an ongoing issue for American companies, and while there are positive signs, such as an increase in the proportion of respondents who consider regulations for their industry to be transparent, this is still coming from a relatively low base,” said Ron Klein, principal of global consultancy firm PwC Strategy&.
The report is based on the results of AmCham Shanghai’s 2015 China Business Climate Survey, which interviewed 406 companies on performance, challenges and strategy, the outlook for risk, business disruption and the trends driving business.
There are 3,600 members in the chamber, 1,700 of which are corporate members, ranging from Fortune 500 corporations including Coca-Cola Co, Dow Chemical Co and General Motors Corp, to small and medium-sized enterprises.
“We must embrace innovation and new business models, while urging the government to undertake needed reforms,” said Jarrett.
