NEW YORK, Sept. 26, 2003 –The percentage of Japanese and Korean companies investing in China will increase from two-thirds now to more than 80 percent in two years, according to an Accenture survey released today.
The survey was conducted to gauge the attitudes of Japanese and Korean companies toward current and future investment in China and is available in a report entitled “Investing In China.”
The findings reveal that these companies invest in China to take advantage of its rapidly expanding domestic consumer market (66 percent) and its low-cost labor (44 percent). Manufacturing continues to be the area of greatest investment opportunity, and is expected to increase to 70 percent of all investment committed in the next two years.
“Confidence in China investment remains unabated, despite concerns about severe acute respiratory syndrome (SARS), the timing of China’s full compliance with open markets under the World Trade Organization regulations, and the debate on whether China’s currency should trade freely,” said Accenture partner Sandra Leitch.
While only 13 percent of respondents said China’s investment potential has been overstated, the survey identified a variety of challenges for those seeking to invest there. Finding a good partner is listed the principal challenge (32 percent).
Others challenges to investing in China include burdensome bureaucracy (27 percent), tax and regulatory restrictions (25 percent), and credit risk (25 percent). Companies with established operations in China identified “bringing operations up to global standards” to “maintaining market share in consolidating markets” as other key challenges.
“For Japanese and Korean companies, the current China investment challenge is multi-faceted: defining a market entry strategy, or maintaining incumbent advantage as China’s development model becomes more variegated by region and industry sector,” Ms. Leitch said. “More precisely, this means aligning investment strategy with a company’s stage of current capability in China.”
The survey findings also point to some emerging trends. The appeal of China as a back-office or outsourcing location is growing. More than one-fourth of respondents (28 percent) said they already have back-office operations in China, and 20 percent said they outsource certain functions to operations in the country. These figures are expected to increase to 34 percent and 38 percent, respectively, during the next two years. The leading functions outsourced to China are human resources and training, supply chain management and procurement, and finance and accounting, the survey shows.
About the Survey
The Economist Intelligence Unit interviewed 100 executives in Japanese and Korean companies in June 2003 on behalf of Accenture to ascertain their attitudes toward current and future investment in China.
Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills, and technologies to help clients improve their performance. With more than 80,000 people in 47 countries, the company generated net revenues of US$11.6 billion for the fiscal year ended August 31, 2002. Its home page is www.accenture.com.