U.S. Business Benefits

More than 90 American companies had an optimistic business outlook on China, up 80.7 percent in 2008, said the American Chamber of Commerce in China (AmCham China) releasing the 2010 China Business Climate Survey on April 2. The survey covered 388 member firms of the chamber.

This reflects the perception that China has emerged from the downturn in a solid position and that China's medium-term outlook is quite strong, said Christian Murck, President of AmCham China. 

Nearly half of respondents reported comparatively higher China margins in 2009 than they saw worldwide, an increase from 35 percent in 2008.

"American companies are finding that their performance in China is the bright spot in an otherwise difficult global picture," said J. Norwell Coquillard, Chairman of AmCham Shanghai. 

While many companies put investments and expansion on hold in 2009, almost 80 percent of American businesses in China plan to increase their investment in 2010.

As in past years, the survey data illustrate there is a strong positive correlation between levels of profitability and a company's length of time operating in China. This reflects that unprofitable companies tend to leave the market, and also the increased profitability of U.S. companies as they become increasingly familiar with the Chinese market.

The local regulatory environment became the most problematic business challenge of this year while increasing labor costs and employing skilled workers and managers remained acute concerns for the surveyed companies, said the chamber. 

Overcapacity Crackdown

The State Council issued a circular on April 6 to cure industrial overcapacity in nine sectors including coal, steel and cement.

Specifically, the circular ordered to eliminate at least 50 million kilowatts of small thermal capacities and shut down 8,000 small coalmines by the end of this year, as well as 30 tons of backward steel-making capacities by the end of 2011, among other objectives.

This is not the first time the country called for a clampdown on overcapacity, but much of the efforts were watered down as local governments were reluctant to compromise on economic growth.

But the Central Government now seems determined to make a substantial push. The circular stipulated the exact amount of capacities each province, municipality and autonomous region must reduce, and vowed heavy punishments on those failing to meet the goal.

SAIC Fares Well

SAIC Motor Corp., China's biggest automaker, said its 2009 net profit soared nine-fold from a year earlier to a record 6.59 billion yuan ($965 million), fueled by strong vehicle sales spurred by government stimulus policies.

The Shanghai-based automaker sold 57 percent more vehicles at 2.72 million units last year, which helped it capture an improved market share of 19.9 percent.

The government handed out generous policy incentives last year, which have effectively lifted market sentiment and attracted buyers back to showrooms.

While cheering about the auto euphoria, market analysts are wondering how much longer the good times could possibly continue. Many worried the stimulus measures have brought most potential buyers to the table, leaving little room for growth this year.

Xu Caihua, an analyst at Guodu Securities Co. Ltd. said he expects a rosy prospect for SAIC this year.

"But it may lose some profitability due to risks of overcapacity, price wars and rising raw material prices," Xu said.

Investment and Trade Expo

The Sixth Northeast Asia Investment and Trade Expo will be held September 2-6 in Changchun, capital of Jilin Province, organizers said at a recent press conference.

As one of the country's biggest international trade fairs, the event will have 2,200 standard booths this year for more than 50,000 exhibitors from home and abroad.

"The expo has become an important vehicle to promote the economic tie-up between northeast China and the rest of the world," said Chen Weigen, Vice Governor of Jilin Province, at the press conference.

The previous five events of the expo have witnessed 1,011 investment deals worth more than 460 billion yuan ($67 billion).