Some 90 percent of senior executives at foreign companies in China confirmed plans to expand operations in China over the next three years. The survey included responses from 680 companies from Asia, Europe and North America, which invest annually US$4.5 billion in China.

"Most of the companies listed in the survey regard China as a highly challenging but potentially hugely rewarding market. They are grasping the moment to start their businesses and expand their operations in China," said Jim Orr, Asia-Pacific tax managing partner of Deloitte Touche Tohmatsu.

Ninety percent of international companies already operating in China intend to invest in expanding their business, according to the survey. Sixty percent of companies not yet operating in the country see China’s mainland as a great important market within the next three years. Almost two out of three companies will expand their manufacturing line, and some other companies extend their business in different areas. Some companies plan to reduce and expand their business simultaneously to regroup and optimize their investment structure. Beijing, Shanghai, Guangzhou and Shenzhen have become their first chosen cities for investment in China.

The Asia-Pacific region has the most optimistic outlook toward investing in China, with almost all companies planning to expand their business operations in China in the next three years. Almost 90 percent of European companies and 80 percent US companies plan to do the same.

Companies in the survey believe that they will face four challenges in starting or expanding their investment in China after China’s entry into WTO.

The first challenge is in operating. The companies saw China’s legal environment as a major obstacle in business operating. Swindling and infringing on others’ rights is the biggest risk. Companies with operations in China are more concerned about the pace and extent of China’s implementation of its WTO commitments. And companies in the area of finance and telecom are more concerned about regulation of the industry.

Financing is the second key challenge. Since China’s financial institutions are not yet a source of financing, almost half of the companies plan to finance their expansion internally. Nearly one out of four companies put in only the capital they needed through China’s financial institutions. Two out of three companies intend to borrow money from foreign financial institutions and China’s institutions at the same time. More than one in ten companies will establish joint-venture companies, and go public in the domestic market, especially the telecom and financial companies.

The third challenge is restructuring. Foreign companies are re-evaluating their structure and business models to take advantage of the business opportunities after China steps up its opening to the outside world. Ninety percent of companies will expand their investments through widening their business scope, increasing their equity in joint ventures, establishing new enterprises, and merging enterprises. The majority of respondents plan to re-evaluate their business models and structure. Almost 30 percent of companies said they intended to increase their equity and control of joint ventures.

The fourth key challenge is human capital. Finding local talent is particularly important among the international companies already operating in China. Two out of three companies plan to attract more local talent, and expect that recruiting and retaining talent will become more difficult. One in three companies intend to reduce the number of foreign executives at senior positions, but professional service companies favor them in senior positions.

(新华社[Xinhua News Agency], by Ye Guobiao, translated by Shan Xingmei for china.org.cn)