EU firms are thriving in China, survey finds

China Daily, May 26, 2011

A survey released on Wednesday showed that European companies in China saw significant increases in revenue and net profit in 2010, and European companies have reaffirmed their commitment to continue developing in the Chinese market.

The survey by the European Union Chamber of Commerce in China found that about 78 percent of responding European companies reported a marked revenue increase last year, compared with 50 percent in 2009, and 71 percent reported a rise in net profit in 2010, compared with 43 percent in the previous year.

"China is increasingly regarded as a strategic market for European companies, not only because of the Chinese market itself, but also for the companies' global strategies," said Davide Cucino, president of the chamber.

About 70 percent of the companies reported that profit margins in China were higher than or equal to their worldwide profit margins, and about 59 percent said they are planning major new investments in the country in the next two years, up 11 percent from last year.

The companies' optimism comes partly from their confidence that China's 12th Five-Year Plan (2011-2015) will stimulate the business environment, opening opportunities for high-tech and green products and technologies and in the service industries, Cucino said.

The Chinese market has great potential, said Dominique Pouliquen, president of Alstom China.

It is the largest market for the French company's core businesses: transportation, and power generation and transmission.

About 40 percent of the global new power plant investment is planned in China each year and about 50 percent of the world's new metro lines each year are built in China, indicating the dynamism of its market and its sustainability over the next decade, he said.

"According to the 12th Five-Year Plan, China's infrastructure market is growing and will continue to grow over the next decade, triggered by accelerated urbanization and the Chinese government's increasing interest in clean energy," he said.

European companies are also eager to tap into the country's rapidly growing demand for goods and services in the coming years.

Germany's Volkswagen Group, Europe's biggest automaker, said it has full confidence in its prospects in China.

Volkswagen will invest 10.6 billion euros ($14.9 billion) in the country to expand production facilities and develop new products from 2011 to 2015, representing the largest single investment in Volkwagen's and the Chinese auto industry's history, the company said.

DHL, a leading logistics company, said China is the fastest growing market in its global network and has huge potential for the express delivery industry. In 2010, the turnover of China's express delivery service business hit 57.3 billion yuan ($8.82 billion), an increase of more than 19 percent year-on-year, according to the China Express Association.

But the companies surveyed also mentioned growing competition from domestic companies, which have made improvements in areas ranging from brand recognition to technology development.

Alstom's Pouliquen said local competitors are now mature, but "adaptation is the key for success". He added that his company will further adapt to the market through higher localization, closer partnerships, product portfolio adjustments, innovation and the development of local talent.

The competitive environment keeps changing, DHL said in a written interview. However, the company believes that China's economic development is positive, with ample demand for aviation logistics, and it has developed a long-term strategy in the China market.

The survey also repeated European companies' concerns with China's regulatory environment, and they suggested that the "rule of law, transparent policymaking and implementation" would be a key driver for China's economic performance in the coming years.

The European Union is China's biggest trading partner. China attracted $2.68 billion in foreign direct investment from the 27 EU member states in April, up 23.42 percent year-on-year. Those countries invested in 562 new companies in China that month, up 16.36 percent from a year earlier, according to the Ministry of Commerce.