Sixty-eight percent of American companies in China reported profitable or very profitable performances in China last year, while 86 percent of the companies reported higher revenues over the previous year, according to a recent survey by the American Chamber of Commerce in China with some 450 of its member companies.
The 2005 Business Climate Survey, included in the chamber's White Paper 2005, shows that 93 percent of survey respondents report that China's economic reforms have improved the climate for U.S. businesses and 92 percent said their five-year business outlook in China is "optimistic" or "cautiously optimistic".
It should be noted that 62 percent of the respondents said they are in China to serve the local market and another 11 percent are exporters to China.
Results of the survey show that with sustained high speed economic growth, China has become not only a leading market in the world, but also a significant profit source for foreign investors.
Statistics show that over 450 of the top 500 multi-national companies have started business in China. "What lures them is definitely profits," said Zhu Hengyuan, Ph.D. of economics and management at Qinghua University.
China has become the largest profit source for Nokia, and the China market is still growing faster than anywhere else. Nokia's net sales in China rose from 2.013 billion euros in 2003 to 2.66 billion euros in 2004; while in the American market, its sales fell from 4.475 billion euros in 2003 to 3.416 billion euros in 2004.
Motorola has even closer ties with China. Since it entered China in 1987, Motorola has witnessed substantial growth. With its wireless paging products, Motorola became the winner in the big market and also a winner in the global market within a short period of time.
Statistics from the Ministry of Information Industry show that in the first seven months this year, China's mobile phone subscribers rose by 3.319 million to total 368 million.
A similar story is going on in China's auto industry.
In 2004, 25 percent of General Motors'profit came from the China market and the percentage is expected to grow this year. In June 2004, GM decided to move its headquarters in the Asia-Pacific region to China. Obviously, GM counts its sustainable growth in China as a critical factor for the company's development in the global market.
"China's market is similar with the European market in its growth model, but the growth rate is five times of the European market," said Kevin E. Wale, president of GM China.
He said China has become GM's second largest market in the world and predicted it would grow at 10-15 percent this year.
And GM, with 85 percent of its Asia-Pacific business in China, would keep a double-digit growth, said Wale.
Statistics from the Ministry of Commerce show that over 5 million cars were sold in the Chinese market in 2004 and the country boasted 27.09 million cars at the end of the year, making it the third largest auto market in the world.
While foreign companies are happy with increasing profits, their Chinese counterparts are feeling the pressures of competition.
Much earlier than usual, Liu Heng went to his mobile phone shop near Sanyuanqiao in bustling business area of
Beijing on September 1. Every thing was the same except the fate of the shop. It had been selling home-brand handsets for five years. And September 1 was its last day!
"Time is too hard for home brands," said Liu. His shop struggled for some time and was finally sold. The young guy was reluctant to say goodbye to his shop for it was there he got the first bucket of gold. Liu's sad story testified to the fate of the whole mobile phone manufacturing industry in China.
Major Chinese handset maker TCL released its half-year report on August 31, announcing a loss of 853 million HK dollars. In the first half year, the mobile phone maker only sold 1.9 million handsets, a drop of 57 percent over the same period last year.
TCL was not the only failure. Another well-known domestic mobile phone brand Bird reported a loss of 107 million RMB yuan against its profit of 111 million yuan in the first half of last year.
Amoi and Konka had similar stories.
The four major Chinese brands of mobile phones were all losing at the same time, breaking a record in China's mobile phone history.
All this happened against the background when China became the world largest market of mobile communication and foreign brands are enjoying rising profits there.
"The lucrative mobile phone market has become a paradise for foreign companies but the cake is a little bitter for the domestic brands," said Huang Jing, an expert of mobile phone communication with the China Center of Information Industry Development (CCID), a global consulting company in China.
"Technology and after-sales service are two vital factors that fail the domestic brands," said Huang.
Chinese auto makers in a disadvantageous and inferior position tasted a similar taste of the market.
"We have to pay a big sum of patent fees to foreign companies for moulds, designs and even upgrading of electronic technology," a senior executive with an auto maker in east China's Zhejiang Province told how they struggled to survive in the seemingly expanding car market.
"As for the core technology of high-end engine, we have no place to buy and even if foreign companies agreed to sell, we could not afford it," he said.
"Lack of core technology is the main reason why Chinese companies give the lucrative market away to foreign companies," said Zhu Hengyuan.
Ever since China entered the World Trade Organization, the country has been strictly following the relevant rules to open its industries step by step.
Most of the mutli-national giants in the auto industry have come to China. With the competition heating up, the market share for Chinese companies is getting smaller and smaller,said Zhang Yuxian, an expert with the State Information Center.
Boasting core technology, advanced management expertise and marketing experiences in the world, the foreign-invested companies are sure to be more competitive than their Chinese counterparts and therefore, win more profits from the Chinese market, said the expert.
