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AmCham: Foreign firms need domestic strategy in China

FOREIGN companies should consider China less as a low-cost provider of labor and resources and more as a competitive manufacturing and sales environment - ideally the hub for an Asian growth strategy, said the American Chamber of Commerce in Shanghai in its latest survey.

It suggested foreign manufacturers in China develop a strategy to capitalize on the domestic market and reduce dependence on exports by moving beyond the premium segment and down the price ladder.

It also gave advice that investors should develop new business models for the domestic market and tailor current products to meet local preferences and conditions.

"Manufacturing among foreign-invested companies continues to evolve steadily, with more companies implementing sophisticated production operations and technologies while also integrating their China operations into their global supply chains," the survey said.

China remained a popular manufacturing base for foreign companies amid the global economic downturn as investors had growing interest in the vast Chinese market.

But foreign investors had to cope with different challenges, changing from rising production costs to lower rates of domestic growth, static demand for Chinese exports and global currency volatility, said AmCham Shanghai, citing the results of a survey issued earlier this month.

Only 10 percent of respondents last year said that they had concrete plans to relocate or expand manufacturing capacity out of China in the next five years, compared with 17 percent in 2007, despite countries such as India and Vietnam providing low-cost alternatives.

Meanwhile, 57 percent of companies in the survey said the dual approach - exports and tapping domestic demand - was the primary motive for establishing or increasing their presence in China last year, up from 47 percent a year earlier.

The survey polled 108 foreign-invested manufacturing companies in China in the fall of 2008. A follow-up survey on 79 of those companies was completed in late December.


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