EU Investors Paint Dull Picture

Source: South China Morning Post
Date: 19 June 1999

By Mark O'neill in Beijing

Half of the respondents to a survey of European investors in the mainland said their net profit was worse than planned, with 23 months needed on average to break even, while more than half expected the mainland to face a crisis similar to that which has swept across Asia.

Fiducia, a Hong Kong consulting firm, sent 80 to 100 page confidential questionnaires to 1,500 European companies with investments in the mainland and received replies from 136 senior managers.

Last year, firms from the European Union invested US$4.5 billion, accounting for 10 per cent investment in the mainland, according to the State Statistical Bureau. An EU official said in the first four months of this year, EU investment in the mainland fell 15 per cent year-on-year.

Of the companies surveyed, 47 per cent said they were satisfied with the general performance of their company, 11 were unsatisfied and 42 said it was below expectation but still acceptable.

On gross profit, 40 per cent said they were on target, 43 per cent said it was worse than planned and 17 per cent said it was better than planned. Of companies that had invested in 1997 or before, 55 per cent had achieved a break-point point, with 23 months the average period.

Only 22 per cent of all companies have achieved the average time.

Asked if they had difficulties in obtaining foreign currency, 9 per cent said very often, 44 per cent said sometimes and 47 per cent said no. Asked if the Asian crisis had affected their mainland operations, 33 per cent said no, 16 per cent said strongly and half said partly.

Asked if the mainland will face a similar crisis, 54 per cent said yes and 46 per cent said no. In response to such a crisis, 45 per cent will down size their operations, 67 per cent will cut costs and 21 per cent will increase exports.

Despite this, most of the companies surveyed believe that they can improve their performance significantly within the next three years and the scheduled investment volume for the next three years is still expected to rise.

Juergen Kracht, managing director of Fiducia, said companies were less optimistic than during the previous survey conducted at the end of 1997, and had become more cautious and realistic, with many banks not willing to do mainland projects without 100 per cent security from the company’s head office.

"Companies no longer accept that China is different from other countries. The aim of their operations is to make profit. It is not just to be in China to get market share", he said.