China is coming of age as an important market for multinational companies, and the process is changing the business opportunities and strategies of companies that do business in many countries.

 

This is the conclusion of a research report released Thursday by the Economist Intelligence Unit (EIU), an information service arm of the Economist Group.

 

A survey was conducted in March and April this year of 217 senior executives from multinationals with operations in China. The survey included all major industries, including automobiles, finance, logistics, pharmaceuticals, retail and telecommunications.

 

Most foreign companies came to China in the late 1990s believing it was a huge market with 1.3 billion consumers, but were disappointed, said Robin Bew, EIU's chief economist. "But now, the country is indeed a huge consumer market, with 100 million people having purchasing power."

 

Multinationals have been increasing sales and improving profitability in their Chinese operations, he said. Improved infrastructure and policies have made the market more accessible to the big overseas companies.

 

As a huge market with strong demand, more foreign companies are viewing China as a strategic location for their global development, said Paul Cavey, EIU's chief China economist.

 

More than half of the executives surveyed believe the Chinese market is key to their global strategy, and 41 percent think China is of strategic importance to them.

 

However, the multinationals are also facing great challenges. In the 1990s, competition was rare in many fields, but today it is becoming more intense. Large, medium and small companies from Europe and the United States, firms from other Asian markets, and domestic enterprises are all competing for slices of the China pie.

 

Market shares held by multinationals are decreasing in many sectors, such as the auto industry, because of the rapid growth of local companies, Cavey said. He admitted, however, that multinationals might have monopolized a few markets.

 

In dealing with the changing operating environment, the multinationals are exercising their strengths in brand building and marketing, and cutting operation costs through comprehensive localization. Merger and acquisition activities have soared in the past two years.

 

(China Daily June 4, 2004)