Cost increase was the top business challenge faced by US companies with operations in Shanghai last year, according to an annual China business report released by the American Chamber of Commerce in Shanghai (AmCham Shanghai) Wednesday.
While rising cost was not among the top 10 challenges faced by US companies in 2010, nearly 91 percent of the 318 companies surveyed said higher costs hindered their businesses in 2011 and 66 percent said rising labor cost and high inflation had a bigger effect on their business than a year before, according to the survey conducted from mid-November through mid-December.
As a result, 78 percent of the surveyed companies said that they were "profitable" or "very profitable" last year, lower than a record 79 percent in 2010.
"Human resources cost rolls into such an issue this year. We would assume that human resources cost challenges all of us," Kent Kedl, managing director of Greater China and North Asia at Control Risks, and a supporting partner in the AmCham survey, said at the panel discussion yesterday.
"But China is still a huge focus of global companies. As China is maturing, as the market is maturing and our own experience of working in China is growing, we are looking for how China fits in the global market," he added.
Li Chang'an, professor of economics at University of International Business and Economics, agreed that rising costs have brought huge pressure on both local and global companies and China is gradually losing its competitiveness in human resources cost.
"It is inevitable though, as the country's GDP grows rapidly and efforts to protect workers' rights are enhanced," he told the Global Times yesterday.
Among other business challenges faced by the US companies surveyed, human resources constraint was rated next to cost increase, followed by increasing competition.
Despite existing business challenges, two thirds of companies said their revenue growth in China exceeded the average growth in other countries and regions last year.
In addition, the report found that China remains one of the top three investment destinations for 69 percent of surveyed companies and nearly 71 percent of them plan to increase their investment in 2012.