From the Financial Times: “Foreign companies’ profits in China have increased rapidly in the past four years on the back of a strong economy but remain tepid compared with other countries with much smaller markets and slower growth. ‘
There is also another article entitled “China’s market is not so lucrative” (sub required) on the same paper today.
From “China’s market is not so lucrative”
The fact is that foreign earnings from the Chinese economy have increased quickly, but from a low base. Indeed, many foreign businesses in China are still struggling to make money at all. We know this from surveys such as the one conducted annually by the American Chamber of Commerce. Even in 2003 – when the economic environment was extraordinarily favourable – most respondents were unable to achieve a profit margin above their global average.
In fact, a large proportion of foreign enterprise earnings ends up in the hands of a tiny number of companies that enjoy “lucky breaks” in China’s heavily regulated operating environment. The biggest winner used to be mobile telecommunications, a 1990s business that ran up against no vested interests in China and contributed as much as half of US companies’ mainland-reported earnings as recently as 2001. But, from 2002, domestic companies, bankrolled by the state, moved into the mobile handset business and their cut-throat pricing destroyed profits for everybody.
