Quantcast
Channel: China Law Blog » venture capital
Viewing all articles
Browse latest Browse all 6

It’s Simple. China Is All Good. And Business Demands We Realize This.

$
0
0

Well, not really.

But since I did a post last week, entitled “It’s Simple. China Is All Bad. And Politics Demands We Realize This,” symmetry dictates I use the “all good” title on this one.  In my China is “all bad” post, I poked fun at those who attack China’s business and economic fronts for political reasons.  Among other things, I questioned those who claim China is on the verge of economic collapse by noting that the Chinese are generally quite optimistic about their country.  At the time I blogged on this issue, my best evidence of Chinese optimism was China’s strong support for capitalism:

Mr. Halloran talks about how wealth disparity is disruptive, but he ignores that the general view in China these days is one of optimism. It is no accident that a recent international survey found that the Chinese view capitalism more favorably than those of any other country.  They view it favorably because (at least so far) it has done so well for them.  People who believe they are on an ascendancy tend not to be disruptive.

Today, I have even better evidence.  The Grant Thornton accounting firm released its 2006 International Business Owners surveyand the verdict on China is that China’s business owners are the most optimistic in the world.

Highlights from the survey of 300 business in China and 7,000 businesses around the world included the following:

  • China’s business owners are the most optimistic in the world about 2006 growth prospects.
  • China’s business owners are worried about domestic competitiveness and the availability of capital to continue international expansion.  I have previously blogged on the difficulties private business owners face in finding capital in this post, entitled, “Hey Buddy, Can you Spare a Yuan? The Sorry State of SME and Consumer Lending in China” and in “Hey Buddy, Can you Spare a Yuan, Part II — The Sorry State of Lending in China.”
  • Nearly one in five medium-sized businesses in the worldwide survey now imports from Mainland China. The results of the first independent survey of business owners in Mainland China show that business owners are among the most confident in the world about the local economy.  Only three countries/territories out of thirty surveyed ‘ India, Ireland and South Africa ‘ were more optimistic. And when asked about prospects for growth in turnover in 2006, Mainland China topped the table. This made it the most optimistic country in the survey.
  • Medium-sized businesses in Mainland China are bullish about export prospects for the year ahead. The survey balance was one of the highest among the thirty countries/territories surveyed.
  • China’s employment outlook is very healthy, with 49% of respondents forecasting an increase in their workforce.
  • China’s surge in investment is likely to continue, with 58% of the Chinese businesses intending to invest more in buildings and 53% in plant and machinery.

According to Gabriel Azedo, a Grant Thorton Divisional Director for the Asia Pacific region, “Our survey demonstrates that the economic miracle Mainland China is experiencing is not only benefiting large enterprises but is trickling through to medium-sized companies. The survey, the first of its kind, shows that Mainland Chinese business owners are very positive about the economic prospects for the country but there is concern about constraints impacting the ability to grow their business. Who knows, this may be the first sign that Mainland China may not have the ability to meet the widely expected goal of it becoming the world’s largest economy by 2050.’

Not surprisingly, the survey also revealed that not everything is good for business in China and the following concerns were prominent:

  • A high proportion of mid-size businesses in Mainland China are clearly worried about a wide range of factors and are among the most concerned in the world about constraints to expansion.
  • In a listing of thirty countries/territories, Mainland China comes 5th in the table citing ‘cost of finance’ as a constraint to business expansion, 2nd for ‘shortage of working capital’, 4th for ‘shortage of long-term finance’ and 9th for ‘availability of skilled workforce’
  • 39% of Chinese business owners were worried about ‘cost of finance’ as a constraint to business expansion, 39% about ‘shortage of working capital’, 32% about ‘shortage of long-term finance’ and 37% about the ‘availability of skilled workforce’
  • In addition, 34% were worried about regulation and red tape and nearly half (44%) about shortages of orders and reduced demand (particularly due to increased domestic competition.)

China will need to resolve the lack of financing options for its small and medium business if it wants to see its private sector companies (I am assuming most of the surveyed companies were private companies because the survey focused on medium sized companies, which in China tend to be privately held) continue to expand.  Foreign venture capital funds are starting to fill this hole and it will be interesting to see how far this goes toward solving the problem.

Bottom Line:  China is not without its problems, but its economic growth is real and that growth fuels its optimism for the future.  


Viewing all articles
Browse latest Browse all 6

Trending Articles