The survey, released by professional services organization Deloitte Touche Tohmatsu and CFO Asia magazine, provides compelling evidence that international companies see China as the key world growth market as the global economy moves toward recovery.

Results show that despite a slowing global economy, nine in ten foreign companies already operating in China intend to invest in expanding their Chinese businesses. Already, six in ten companies not yet operating in China see the mainland market increasing in importance within the next three years.

The planned expenditure of the 680 respondents, primarily senior financial executives from 680 companies in Asia, Europe and North America, amounts to some 4.5 billion U.S. dollars annually for the same period.

"Conducted in October and November 2001, the survey also illustrates the tremendous attraction the China market holds for North American companies," said CFO Asia Editor-in-Chief Tom Leander.

"One key finding was that 76 percent of U.S. respondents indicated that their China investment plans had not been affected by September 11," he said.

Source: People's Daily

"After the adjustments and consolidations in 2001 and 2002, the growth of the market will pick up speed until 2006," said Yang Tianxing, president of CCID Consulting Co Ltd which is affiliated with the Ministry of Information Industry.

US computer processor giant Intel's CEO Craig Barrett also said on Thursday that China will surpass Japan as its largest customer in this year or the next.

According to the forecasts of CCID Consulting, the shipment of desktops will see a breakthrough with 10.1 million units in 2003 and the figure will reach 17.4 million, more than double the 7.28 million last year.

The average annual growth rate for the Chinese PC market will remain at 18.8 per cent for the next five years.

Sales volume of the market is also expected to almost see a two-fold increase to 104 billion yuan (US$12.6 billion) from last year's 51.7 billion yuan (US$6.3 billion), according to the research firm.

Yang chided the pessimistic outlook of some researchers that China's PC market has entered recession.

"The difficulties many PC makers faced last year mainly resulted from too high expectations of computer sales in China after the Internet fever in 2000, so the long-term prospect will still be positive," the veteran IT expert said at the weekend.

WTO entry to spur demand

He believed China's entry into the World Trade Organization (WTO) last December and the initiation of the nation's 10th Five-Year Plan (2001-05) would be driving forces for the sustained growth of the PC market.

The start of construction for the 2008 Beijing Olympic Games will also spur demand.

For foreign computer makers, the attraction of the world's most populous market will be enhanced in future, Yang said.

"In five to 10 years, more and more international players will shift their plants to China which will become a centre of PC manufacturing and exports by then," he added.

However, there will still be hard times for almost all PC makers this year, analysts believe.

According to a recently released report on CCID Consulting on the desktop market in 2001 and 2002, the growth of shipments last year was 17.4 per cent on 2000, while the growth of sales was only 12.3 per cent.

The report, one of CCID Consulting's 67 reports on almost all areas of the information industry in China, also forecasts this year's growth rate of PC shipments over 2001 will be 16.7 per cent, lower than the rate in 2001. The growth of sales is expected to shrink further to 12.2 per cent.

Meanwhile, the average price of desktops last year dropped by 4.4 per cent on the previous year.

Changes and industry reshuffle inevitable

"The scenario for the market will see some major changes in these years and an industry reshuffle is inevitable," said Zhang Hongfen, a senior researcher on computer market with CCID Consulting.

She predicted the arena for desktop makers would be more and more concentrated into the hands of some big nationwide players.

"Future competition will be based on efficiency, so large scale firms will have an advantage," she explained.

Together with the increased ferocity of the competitions, rising frequency of mergers and acquisitions will also characterize the evolution of the market, with many existing players making an exit.

Source: People's Daily

Furthermore, China's efforts to become a world manufacturing centre will benefit economic growth in the Asia-Pacific region and even the entire world, experts say.

Supports from other sectors needed

"The development of the manufacturing sector needs co-operation and support from a string of other sectors," said Wang Zhile, a professor with the Chinese Academy of International Trade and Economic Co-operation, a think-tank under the Ministry of Foreign Trade and Economic Co-operation.

He said these back-ups will come from a number of sectors, such as logistics, financial services and shipping, which would leave room for economic growth in other countries.

"And competition will lead to higher efficiency and faster growth speed," added Wang, at a recent international forum on economic and enterprises reform in China.

The forum, hosted by the Britain-based Wilton Park and Hong Kong's Exceptional Resources Group,gathered together professionals from government departments, universities and companies to discuss issues of critical importance to China and the world.

Forming of a manufacturing centre is a natural process

"The process (of China turning into a world factory) is a natural process, powered by both the growth of the country's manufacturing industry and the relocation of many multinational companies to China ," said Li Boxi, a senior researcher with the Development Research Centre under the State Council.

She stressed that the effort of multinational companies to take advantage of China's cheap workforce would be a driving force in the forming of a global manufacturing base in China.

She was echoed by Kang Rongping, an senior professor with the Chinese Academy of Social Sciences, who said the forming of a manufacturing centre would reflect a natural development of the market-orientated economies and the globalization of the world economy.

Currently, most of the commodities manufactured in China are still low-profile cheap goods with low added value.

To date, China has already become the largest manufacturer and supplier of many commodities, such as clothes, shoes and coal. But most of the goods are primary products.

Source: People's Daily

A decade ago, most multinationals simply tried to replicate in China what they were doing in rich countries and ignored the low consumption power in China since they were naively enamored by the image of one-billion-people market.

"As a result, the 'China dream' turned into a bottomless pit for capital without profit at that time," recalled Andy Xie, senior economist for Morgan Stanley's Asia Pacific.

Xie has recently visited multinational companies headquartered in Beijing. He said that multinationals are now confident enough to predict one billion-dollar profit per annum by 2010.

Statistics show that funds flow out of China from foreign income in China rose to 27.2 billion U.S. dollars in 2000 from 17 billion just five years earlier. Experts here estimated that as total foreign investment was 304 billion U.S. dollars until 1999, the capital return on foreign investment in China should average between 10 percent to 15 percent, or two to three times that for the state-owned enterprises.

Economic analysts also believed that 10 percent to 15 percent returns on China's 392 billion U.S. dollars foreign direct investment would imply the total income of 40 billion to 60 billion U.S. dollars for foreign investors or 3.3 percent to 5 percent of the country's GDP.

In comparison, the U.S. companies in the S&P 500 index earned 3. 3 percent of GDP on average between 1990 and 2000, on the other hand, Chinese companies that are listed in the local market made about 1 percent of GDP in 2000, the analysts noted.

Xie told Xinhua that he found during his visits many new developments have changed the profit outlook for multinationals in China.

As China's gross domestic product (GDP) rose to 1,160 billion U. S. dollars in 2002 from 388 billion U.S. dollars in 1990, the Chinese consumption power has tripled since 1990, but is still in a low level compared to that in developed countries.

Xie said that due to China's huge population and inability to create wealth on a booming economy, the per capita income is still very low, and the net household wealth lower. And unless China's companies become vehicles of wealth creation by increasing franchise value over time, Chinese households have to continue to rely on bank deposit for wealth accumulation.

"If China's corporate reforms become more successful, deflationary pressure could ease also," the economist said. This macro-economic environment would provide multinationals with greater chance to expand their business in China, according to Xie.

Another important factor that makes multinationals in China profitable is that they have become successful in increasing scale and cutting costs to match selling prices with Chinese wages, Xie said.

The combination of global scale and the Chinese production cost has made Multinationals' products affordable to Chinese consumers, he said. "This is the most important factor that multinational companies in the consumer sector have become profitable," Xie added.

Multinationals are now turning China into a production base for distribution. They are separating the production and sales functions in China and fit both into their global strategy, according to Xie.

"Naturally, China's low cost structure means that its share in multinationals' global production is rising, which is a major force in driving up China's economy now," Xie said. This is why China can continue to grow at about 7 percent, even though it is undergoing structural reforms, he concluded.

Source: People's Daily

It will offer data transmission and seamless connection services to global networks. It will begin operations in Shanghai' s Pudong area, where more than 100 transnational companies are located, and will later expand its business to other major cities in China.

Shanghai Telecom, a subsidiary of China Telecom Corp., has a 60 percent stake in the joint venture, while the AT&T has 25 percent and the Shanghai Information Investment Inc. 15 percent.

The first clients of the company will be those in the ranks of the Fortune 500 top performing corporations in Pudong, according to the company.

Source: People's Daily