China "Fails To Live Up To Its Promise"

Source: Daily Telegraph
Date: 21 June 1999

By David Rennie in Beijing

European companies are finding the much-trumpeted opportunities of the vast Chinese market far less promising than many had hoped, a survey says.

Less than half the European companies in China surveyed by Fiducia, a Hong Kong-based management consultancy, are failing to break even. Most have found their performance worse than expected and managers complained strongly about Chinese bureaucracy.

Juergen Kracht, Fiducia's managing director, said companies were showing a new realism about the size of the potential mainland market for Western-standard goods, which can be counted in the millions rather than the £1.3 billion so often quoted.

"China has been quite smart, and appeared like an attractive bride, but when the make-up is off it is a different picture," he said. More than half the managers who responded to the survey were pessimistic about China's chances of avoiding the Asia crisis, which has so far failed to hit the mainland with full force.

More than half said that they expect a similar crisis to hit China, whose government is pouring billions of pounds into public works in an attempt to stave off economic slow-down.

China had been successful in achieving its objectives from foreign investment - bringing in Western technology and creating jobs - but has failed to create a level playing field for sales.

The confidential survey of 136 companies was conducted with the support of the German Embassy and European Union delegation in Beijing.

Mr. Kracht, whose consultancy has been advising European investors in China for 17 years, said that big multi-national firms had to maintain some presence in China, but he painted an unhappy picture of local managers whose complaints and failures are resented and misunderstood by over-optimistic head offices.