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US Corporations Optimistic About Potential Chinese Market Growth Amid Policy Challenges

| Jan 21, 2016 10:08 AM EST

United States firms are still optimistic about potential market growth in China.

Based on a recent survey by American Chamber of Commerce (AmCham China), most United States firms are still optimistic about potential market growth in China in spite of the insurmountable regulatory challenges they face.

According to the Global Times, the 2016 China Business Survey Report was in line with a poll of AmCham China's member corporations, which sum up to about 500, and carried out in collaboration with U.S.-based Bain & Company.

The survey established that China is one of the top three investment destinations for 60 percent of participants, although profitability and revenue were under pressure in 2015.

The chairman of AmCham China, James Zimmerman, said, "As China's economic growth has slowed down, this year's report shows that U.S. businesses will need to revise their strategies to ensure profitable growth in China."

Approximately 45 percent of the participating companies reported flat or decreasing revenue in 2015 as compared to 2014. Those that reported profit increment in 2015 declined to 64 percent, which is the lowest ever reported in the past five years.

On the contrary, fiscal performance differed greatly among the various industries. For example, about two-third of services companies reported increased revenue, while almost half of the industrial and resources firms exhibited decreasing revenues.

The same publication noted that fewer U.S. firms plan to increase their investment in China this year amid the country remaining a top investment destination. By the end of last year, 25 percent of the respondents either had moved some of their assets or were planning to move them out of China. About 40 percent of these firms reported shifting their capacity to Canada, the U.S. or Mexico.

According to the director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, Huang Wei, the more cautious investment plans is because of the escalating costs and slower economic growth in China.

Huang told the Global Times, "Although some investment will be reduced, high-end services companies, such as those in financial and medical services, will aim to enter China in the near future thanks to the large market and strong demand."

These companies might have some reservations about market access limits. Huang also noted, "China's policy to open up its market will not change, though the pace is relatively slow at the current stage."

Despite the challenging economic climate, there were numerous positive signs, and U.S. firms still envision many opportunities for their China venture. Growth in local consumption and the rise of the middle class provide opportunities in diverse sectors. Technology and R&D-intensive corporations besides those involved in consumer products and services could as well benefit from China's "Internet Plus" campaign and the development of e-commerce.

U.S. companies acknowledge the improvement made in areas like protection of intellectual property rights and the fight against corruption in China, and are supportive of continued efforts.

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