The 2008 Annual China Business Report, released in December by the American Chamber of Commerce in Shanghai, comes with good news and bad.
While American companies in the Yangtze River Delta have survived the economic downturn and continued to grow in the past year, manufacturers in the area are looking toward this year with trepidation.
``In the short term, I think we're going to see some realignment of the strategies that companies are taking,'' said Matthew Targett, who sits on the chamber's board of governors and serves as Asia-Pacific technology director for Invista, a global producer of polymers and fibers headquartered in Wichita, Kan.
Around 40 percent of companies surveyed for the report said their sales increased more than 20 percent in 2008. About 50 percent reported improved operating margins. But as corporate officials look toward 2009, they become more pessimistic.
``It will obviously be a more challenging market in 2009,'' said Norwell Coquillard, chairman of the chamber's board of governors and president of Cargill Investment (China) Ltd. of Shanghai.
``There is still some uncertainty about global financial conditions and their impact on China.''
American companies in Shanghai are focusing more on the Chinese domestic market — 50 percent of the surveyed companies reported a presence in China's second- and third-tier cities. The number of companies looking to sell U.S.-manufactured goods to China increased to 21 percent in the past year, compared with 12 percent the year before.
Companies also are looking more toward innovation, and many are doing their own research and development domestically.
Targett attributes some of that new enthusiasm to government programs encouraging innovation. Some companies are also getting a boost from Shanghai's upcoming World Expo, which is showcasing technologies from companies such as 3M Co. of St. Paul, Minn.
While times are tough, China remains a priority for most of the companies that responded to the survey.
``Most companies see China as integral to their strategy worldwide,'' said Coquillard. ``Despite a difficult business environment, 80 percent of those surveyed said they plan to increase investment in the coming year.''
There is a reason for companies' continuing faith in the China market, said Brenda Lei Foster, chamber president.
Operating margins continue to be higher in China than elsewhere around the globe, and China's domestic market is sure to continue growing, albeit at a subdued pace. The days ahead will be trying for many companies, Foster said, but China remains a promising market.
``When companies look long term, they remain quite optimistic,'' she said.