Foreign companies counting on China
By Joy Wang |
December 8, 2011, Thursday
|
Print Edition
Print Edition
MULTINATIONAL companies are counting more on China as the global economy deteriorates more than expected. However, they are also losing some of their traditional strengths in a fiercer competitive environment, an Economist survey showed yesterday.
Based on interviews with 328 senior executives at non-Chinese MNCs, the survey found 49 percent of respondents saying the fallout from the global financial crisis had raised their companies' expectations in China. Among larger companies with global revenue of more than US$5 billion, the figure was 73 percent.
"China becomes increasingly strategic for global firms when revenue elsewhere may be getting smaller," said Laurel West, Asia director of industry and management research at the Economist Intelligence Unit, a business information arm of the Economist Group. "Also, China's policies to raise people's income and hence more consumption are driving the MNCs' strategy."
China's economy, although showing signs of slowdown, can still manage to grow by more than 8 percent next year, analysts say. In comparison, economies in the European Union may get hardly any positive growth in 2012 while the United States may also experience a feeble recovery.
Global revenue
As a result, many global firms are looking to China to deliver more of their global revenue, West said. Her data showed that sportswear maker Adidas had 8.3 percent of its global revenue from China last year, up from 3 percent in 2005. Chinese revenue also made up 7.7 percent of Siemens' proceeds last year, compared with 4.2 percent in 2005.
However, there are signs that foreign MNCs' traditional competitive advantages, such as the general perception that they have superior technology and better brands, are beginning to erode.
The survey found fewer than 25 percent of respondents felt they had more advanced technology or stronger brands compared with their Chinese counterparts, and human resource consultancies reported that local professionals were increasingly gravitating towards Chinese companies.
Competition with domestic companies is an increasing challenge. The survey found only 22 percent of respondents deemed Chinese firms not a threat, compared to 2004's 65.7 percent.
To cope with these challenges, 40 percent of larger MNCs said they would be sending their most senior executives to China in a bid to improve understanding of the market and speed up decision-making at headquarters.
Based on interviews with 328 senior executives at non-Chinese MNCs, the survey found 49 percent of respondents saying the fallout from the global financial crisis had raised their companies' expectations in China. Among larger companies with global revenue of more than US$5 billion, the figure was 73 percent.
"China becomes increasingly strategic for global firms when revenue elsewhere may be getting smaller," said Laurel West, Asia director of industry and management research at the Economist Intelligence Unit, a business information arm of the Economist Group. "Also, China's policies to raise people's income and hence more consumption are driving the MNCs' strategy."
China's economy, although showing signs of slowdown, can still manage to grow by more than 8 percent next year, analysts say. In comparison, economies in the European Union may get hardly any positive growth in 2012 while the United States may also experience a feeble recovery.
Global revenue
As a result, many global firms are looking to China to deliver more of their global revenue, West said. Her data showed that sportswear maker Adidas had 8.3 percent of its global revenue from China last year, up from 3 percent in 2005. Chinese revenue also made up 7.7 percent of Siemens' proceeds last year, compared with 4.2 percent in 2005.
However, there are signs that foreign MNCs' traditional competitive advantages, such as the general perception that they have superior technology and better brands, are beginning to erode.
The survey found fewer than 25 percent of respondents felt they had more advanced technology or stronger brands compared with their Chinese counterparts, and human resource consultancies reported that local professionals were increasingly gravitating towards Chinese companies.
Competition with domestic companies is an increasing challenge. The survey found only 22 percent of respondents deemed Chinese firms not a threat, compared to 2004's 65.7 percent.
To cope with these challenges, 40 percent of larger MNCs said they would be sending their most senior executives to China in a bid to improve understanding of the market and speed up decision-making at headquarters.
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