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China Economy Less Important Than Expected, Multinational Firms Say

First Posted: 12/07/11 08:37 AM ET Updated: 12/07/11 08:37 AM ET

China Economy

Multinational companies operating in China are placing less importance on the world's second-biggest economy amid rising local competition and concern over intellectual property (IP) rights, a survey showed on Wednesday.

Close to half of 328 companies that took part in the survey conducted by the Economist Intelligence Unit (EIU) said they had higher expectations for China following the 2008/09 global financial crisis, with 17 percent saying they expected it to become their top market within five years.

But those that saw China as "critical to global strategy" fell to 37 percent, from 53 percent in a similar survey in 2004.

"I think this represents a degree of caution," Laurel West, Asia director of industrial and management research at EIU, told a news conference. EIU is a sister company of The Economist magazine.

She said the reading was also a reflection of companies placing more focus on other emerging markets, such as Brazil, India, Indonesia and Vietnam, as well as concern over Chinese government policies.

Nearly half said they were concerned that they would have to give up IP in exchange for market access, while 46 percent said the regulatory environment would have a significant impact on their China strategy over the next five years.

The survey was conducted between late June and July on multinationals based in Europe, North America and Asia.

IP RIGHTS VIOLATIONS

China has been repeatedly criticized for widespread violations of IP rights, with copies of expensive brands of watches, bags and computer software still widely available.

An annual survey by the American Chamber of Commerce in Shanghai, which bills itself as the "voice of American business" in China, showed in January that 71 percent of respondents said enforcement of IP rights had stayed the same or deteriorated in 2010, up from 61 percent in 2009 and 64 percent in 2008.

In May, a survey by the European Union Chamber of Commerce showed a similar rise in corporate concern over IP protection, although 57 percent of respondents said China was of growing importance to their business, up from 40 percent in 2010.

The EIU survey also showed that only a quarter of larger multinational companies felt they had superior technology or stronger branding amid increasing competition for talent with local companies.

Of the 70 companies it surveyed that disclosed China revenue, the EIU said only 10 -- including Mead Johnson Nutrition Co, BHP Billiton Ltd, Yum Brands Inc and Advanced Micro Devices Inc -- had China sales that made up more than 20 percent of global income.

(Reporting by Kazunori Takada; Editing by Chris Lewis and Muralikumar Anantharaman)

In second paragraph corrects number of survey respondents to 328 not 238, and fixes spelling of Economist Intelligence Unit.


Copyright 2011 Thomson Reuters. Click for Restrictions.

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Filed by Harry Bradford  |