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6 Special Report on the State of Business in South China
President’s Report
This year, 246 companies participated in our Special Re- In terms of planning and risk management, the biggest perceived
port on the State of Business in South China. The study, which challenge to the operations of study participants for the first time
began in 2003, offers us unique insight into the growth and trans- ever changed to “Local competition” signaling an alarming concern
formation of the Chinese economy. I am pleased to report that the for equal treatment. Trailing behind in second, third, fourth and
state of that economy—and the state of business in South China—is fifth places are “Regulatory issues (Chinese government)”, “Rising
excellent. labor costs” “Lack of qualifiable general personnel” and “Foreign
competition.” Results for the three-year period are quite similar,
This year’s Study shows that the Chinese economy has once again with the second and third challenges exchanging places and the fifth-
defied gravity and is well on its way to full transformation and re- ranked category being replaced by “Difficulty in market penetration.”
covery. It clearly demonstrates a high level of confidence by most Elsewhere, participants identified “Increasing inflation” as one of
companies in the reform policies and the direction and future of the their top policy-oriented concerns.
Chinese economy.
This indicated that China’s overall regulatory system is improv-
Regardless of uncertainty in the medium term, we find strong re- ing. The establishment of the IP Courts in Beijing, Shanghai and
investment numbers across the board. Most participants reported re- Guangzhou is one of the important initiatives towards further im-
investing more than they had originally budgeted for over the course provements. However, there are still more to be done, and I believe
of 2015, and for 2016 one-year budgeted reinvestment rose 8.79 that when foreign companies felt more confident that they would be
percent. Even though the three-year budgeted reinvestment slightly treated equally from a regulatory standpoint, and if they felt they had
declined, we still estimate that AmCham South China member com- better insight into the government’s more transparent decision-mak-
panies stand to reinvest greater than $13 billion in 2016 and greater ing process, I am fully confident that we would see investments grow
than $12.6 billion between 2017 and 2018. As I have said in the past, rapidly across China. Moreover, I would argue that those improve-
companies do not reinvest in new projects unless they are confident ments would essentially be favorable side effects of broader economic
in the future. I have always believed that the most reliable vote is the reform that would propel China’s economy into a position of primacy
one cast by companies voting with their pocket books. worldwide.
In 2016, the cross-section of participants has continued to broad- As has been the case in the past several years, we expect one key
en. American-invested Joint Ventures and Wholly-Foreign Owned area of investment to be human resources; this year, fully 81.6 percent
Enterprises are joined by their counterparts from other nations and of study participants reported having hired new employees to take
Mainland Chinese enterprises. We see companies of all sizes, from advantage of the labor market. We estimate that this has led to the
those with fewer than 50 employees and less than $1 million in rev- creation of 994,000 new jobs in China.
enue all the way up to companies exceeding $500 million in revenue
and with thousands of employees worldwide. Every sector of the In light of these figures, I believe it is impossible to argue against
economy is represented, from energy generation and agriculture all the fact that business continues to boom in what is on-track to quick-
the way to cutting edge software and high-precision machinery. ly become the world’s largest economy.
This year we find that almost half of our study participants are With best regards,
involved in manufacturing or trading goods and more than half in-
volved in providing services to the market. One thing that unites Harley Seyedin
those two groups, however, is the fact that 75.6 percent of all par- President
ticipants report providing goods or services to the Chinese market The American Chamber of Commerce in South China
as their primary business focus instead of creating goods or services Vice Chairman, U.S.-China Trade and Investment Policy
for export. The Asia Pacific Council of American Chambers of Commerce
Similarly, 83 percent of participants responded that they
considered the overall business environment in South China to
be “Good,” “Very Good” or “Outstanding”. Thirty-seven point six
percent of participants, meanwhile, reported that, in their opinion,
the business environment had improved somewhat or greatly in
the past 12 months and a further 38.7 percent reported that it had
remained about the same.
6
President’s Report
This year, 246 companies participated in our Special Re- In terms of planning and risk management, the biggest perceived
port on the State of Business in South China. The study, which challenge to the operations of study participants for the first time
began in 2003, offers us unique insight into the growth and trans- ever changed to “Local competition” signaling an alarming concern
formation of the Chinese economy. I am pleased to report that the for equal treatment. Trailing behind in second, third, fourth and
state of that economy—and the state of business in South China—is fifth places are “Regulatory issues (Chinese government)”, “Rising
excellent. labor costs” “Lack of qualifiable general personnel” and “Foreign
competition.” Results for the three-year period are quite similar,
This year’s Study shows that the Chinese economy has once again with the second and third challenges exchanging places and the fifth-
defied gravity and is well on its way to full transformation and re- ranked category being replaced by “Difficulty in market penetration.”
covery. It clearly demonstrates a high level of confidence by most Elsewhere, participants identified “Increasing inflation” as one of
companies in the reform policies and the direction and future of the their top policy-oriented concerns.
Chinese economy.
This indicated that China’s overall regulatory system is improv-
Regardless of uncertainty in the medium term, we find strong re- ing. The establishment of the IP Courts in Beijing, Shanghai and
investment numbers across the board. Most participants reported re- Guangzhou is one of the important initiatives towards further im-
investing more than they had originally budgeted for over the course provements. However, there are still more to be done, and I believe
of 2015, and for 2016 one-year budgeted reinvestment rose 8.79 that when foreign companies felt more confident that they would be
percent. Even though the three-year budgeted reinvestment slightly treated equally from a regulatory standpoint, and if they felt they had
declined, we still estimate that AmCham South China member com- better insight into the government’s more transparent decision-mak-
panies stand to reinvest greater than $13 billion in 2016 and greater ing process, I am fully confident that we would see investments grow
than $12.6 billion between 2017 and 2018. As I have said in the past, rapidly across China. Moreover, I would argue that those improve-
companies do not reinvest in new projects unless they are confident ments would essentially be favorable side effects of broader economic
in the future. I have always believed that the most reliable vote is the reform that would propel China’s economy into a position of primacy
one cast by companies voting with their pocket books. worldwide.
In 2016, the cross-section of participants has continued to broad- As has been the case in the past several years, we expect one key
en. American-invested Joint Ventures and Wholly-Foreign Owned area of investment to be human resources; this year, fully 81.6 percent
Enterprises are joined by their counterparts from other nations and of study participants reported having hired new employees to take
Mainland Chinese enterprises. We see companies of all sizes, from advantage of the labor market. We estimate that this has led to the
those with fewer than 50 employees and less than $1 million in rev- creation of 994,000 new jobs in China.
enue all the way up to companies exceeding $500 million in revenue
and with thousands of employees worldwide. Every sector of the In light of these figures, I believe it is impossible to argue against
economy is represented, from energy generation and agriculture all the fact that business continues to boom in what is on-track to quick-
the way to cutting edge software and high-precision machinery. ly become the world’s largest economy.
This year we find that almost half of our study participants are With best regards,
involved in manufacturing or trading goods and more than half in-
volved in providing services to the market. One thing that unites Harley Seyedin
those two groups, however, is the fact that 75.6 percent of all par- President
ticipants report providing goods or services to the Chinese market The American Chamber of Commerce in South China
as their primary business focus instead of creating goods or services Vice Chairman, U.S.-China Trade and Investment Policy
for export. The Asia Pacific Council of American Chambers of Commerce
Similarly, 83 percent of participants responded that they
considered the overall business environment in South China to
be “Good,” “Very Good” or “Outstanding”. Thirty-seven point six
percent of participants, meanwhile, reported that, in their opinion,
the business environment had improved somewhat or greatly in
the past 12 months and a further 38.7 percent reported that it had
remained about the same.
6
