U.S. Companies in China Shift Towards Services as Market Matures

Services now account for 52 percent of revenues - up 11 percentage points from last year

News provided by

The American Chamber of Commerce in Shanghai

Feb 25, 2014, 06:59 ET

SHANGHAI, Feb. 25, 2014 /PRNewswire/ -- In tune with China's transition from serving as the world's factory floor to becoming a mature, diversified market, U.S. companies have turned their focus to the country's service sector.

According to a report released today by the American Chamber of Commerce in Shanghai, services accounted for more than half (52 percent) of U.S. companies' revenue in 2013 - an increase of 11 percentage points over the 2012 figure.

The shift towards knowledge-driven business was revealed in the Chamber's 2013-2014 China Business Report, which gathered and analyzed data on the performance of, and outlook for, U.S. companies in China.

The report, which is being published for the 13th consecutive year, documented a continuing trend of companies moving beyond purely manufacturing for export, to being involved in a broad range of industries, with the greatest growth happening in the provision of goods and services for the domestic market.

Commenting on the movement of U.S. businesses into China's service sector, Kenneth Jarrett, President of AmCham Shanghai said, "It's not surprising that, now that China's economy is the second largest in the world, the market is attractive to U.S. companies from a broad range of industries. It's also important to keep in mind that China's leadership has prioritized the development of the country's retail and services sectors, and American businesses are world leaders in these areas."

In addition to rise of services, in the survey of nearly 400 member companies that the report is based on, there was an 11 percent rise in responses from companies describing themselves as small or medium-sized enterprises (SMEs), rather than large multinational firms. According to the survey data, 37 percent of companies identified themselves as having 500 or fewer employees worldwide in 2013, up from 26 percent in 2012.

China's improved infrastructure and increasing transparency, combined with a drawn-out economic recovery in the U.S., all contribute towards attracting companies of a broad range of sizes to the market.

Noting the increased presence of U.S. SMEs in China, Robert Theleen, Chair of AmCham Shanghai and Chairman and CEO of Shanghai-based merchant bank ChinaVest said, "With China demonstrating its ongoing commitment to economic liberalization through initiatives like the Shanghai Free Trade Zone, it's natural that more companies are setting up here. When you combine this improving infrastructure with the decades of experience that American businesses now have in this market, it's become easier for U.S. companies to profit from China's growth regardless of their size."

While the report also found a number of challenges facing U.S. businesses in China, including rising costs, HR constraints, increased competition and an unclear regulatory environment, overall profits and revenues were encouraging. Among the U.S. firms responding, 67 percent reported increased revenues in 2013, and 74 percent of companies said their China operations were profitable.

This year, for the first time, the Chamber has made it possible to drill down into the survey responses by industry, economic sector and other criteria online through the Interactive China Business Report which is produced as a companion to the study.

About the 2013-2014 China Business Report

The 2013-2014 China Business Report analyzes and presents the results of the American Chamber of Commerce in Shanghai's China Business Climate Survey, a comprehensive survey of U.S. companies with operations in China. The China Business Climate Survey is one of the longest running studies of foreign business in China, and tracks trends and developments from more than a decade of experience by U.S. companies in the market.

The 2013 survey was conducted online in November and December of 2013, and received responses from 399 U.S. businesses. Independent, global risk consultancy Control Risks assisted in tabulation and analysis of the data and advised on the report.

In addition to distributing a printed version of the report, and making the full document available for download online, this year for the first time the Chamber has made the details of the China Business Climate Survey responses available through the Interactive China Business Report, an online reporting tool that allows users to see detailed responses to the survey by industry, year and other criteria. The interactive report can be found at http://chinabusinessreport.amcham-shanghai.org.

About the American Chamber of Commerce in Shanghai

The American Chamber of Commerce in Shanghai, known as the "Voice of American Business" in China, is the largest and fastest growing American Chamber in the Asia Pacific region. Founded in 1915, AmCham Shanghai was the third American Chamber established outside the United States. As a non-profit, non-partisan business organization, AmCham Shanghai is committed to the principles of free trade, open markets, private enterprise and the unrestricted flow of information.

AmCham Shanghai's mission is to support the success of our members by promoting a healthy business environment in China, strengthening U.S.-China commercial ties and providing high-quality business information and resources. Visit www.amcham-shanghai.org for more information about us.

Visit www. chinabusinessreport.amcham-shanghai.org to access the Interactive China Business Report.

For the inforgraphic page of key report findings, please download from here: http://www.amcham-shanghai.org/ftpuploadfiles/Website/2014-CBR-Infographic.pdf

For the executive summary, please download from here: http://www.amcham-shanghai.org/ftpuploadfiles/Website/China-Business-Report-Executive-Summary-English.pdf

AmCham Shanghai was pleased to work with supporting partner Control Risks on the 2013–2014 China Business Report.

SOURCE The American Chamber of Commerce in Shanghai