Investment boom ahead
Hong Kong iMail; Mar 12, 2002
BY JOYCE LI

CHINA is set for an investment boom over the next three years with 90 per cent of foreign firms now operating in the mainland planning to expand their investment there.

An international survey of financial executives of 680 companies found that the firms intended to invest $35.1 billion annually over the next three years.

The survey, conducted by Deloitte Touche Tohmatsu and CFO Asia magazine revealed that almost all surveyed companies from the Asia-Pacific region would expand their operations in the mainland over the next three years. Nine out of 10 European firms and eight out of 10 American firms intended doing the same.

Almost 90 per cent of those already operating in China intended to expand their operations with 95 per cent of these coming from the technology, retail and wholesale, telecommunications and banking and finance sectors.

About 57 per cent of all surveyed companies not yet operating in China also planned to penetrate into the market in the next three years.

''China is becoming a priority for foreign investors,'' Deloitte's deputy managing partner of tax strategy and operations Joseph Tse said. CFO Asia editor-in-chief Tom Leander said the $35.1 billion the firms planned to invest was $15.6 billion more than expected. The survey, conducted in October and November, found up to 50 per cent of surveyed investors _ consumer product companies in particular were confident of making a profit in less than three years.

''This is over optimistic. It is not an unusually long time to make profit in five years,'' Deloitte's executive director Danny Lau said.

While keen to tap into the mainland's potential, only 7 per cent of respondents were familiar with China's WTO commitments for their industry. Some 74 per cent of companies already operating in China were unfamiliar with mainland taxation and customs. Up to 39 per cent felt raising funds was a major obstacle.

''Existing operators knew about the complexity and enforcement problem of the tax and customs management,'' Deloitte's China division deputy managing partner Alan Tsoi said. He said firms not yet operating in the mainland were most worried about marketing and distribution, and felt China had an unstable political climate. About 65 per cent of respondents were concerned about new competitors.