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Editor's Note: As the 18th National Congress of the Communist Party of China, which opened on Thursday, continues in Beijing, China Daily asked a number of top executives from international companies to give their impressions of the event and their expectations for the country. We asked five questions, and the answers we were given showed great confidence in China and its business environment under the country's new leadership, set to be elected at the congress.
Q1: Given that China's economic growth cooled to a three-year low of 7.4 percent year-on-year in the third quarter, do you think the country can maintain relatively fast expansion during the coming decade? And do you think China will continue to be an important growth engine, both for the global economy and for your company?
Q2: As wages and operational costs rise, China's export growth is no longer as robust as it was, and domestic consumption is still not strong enough to generate as much growth. Have these developments prompted your company to either delay or cancel any investment plans in the country? If not, why?
Q3: What are the expectations for your company's performance in China this year and over the next five years, in terms of sales and profits, in manufacturing and services? How do you view the performance of the industry in which your company operates?
Q4: What is your company's greatest concern about doing business in China?
Q5: What measures do you expect from the new leadership to help improve the business environment for your business or your industry?
president of The Dow Chemical Co Greater China
A1 We believe China will continue to serve as an important engine of growth for Dow and others - but a different kind of engine. As we have mentioned, China is now a transition economy. We believe the double-digit growth we have observed in the region will be replaced by significant but more modest growth over the 12th Five-Year Development Plan period (2011-15).
And, while growth in China is slower than what we have historically seen, we believe it will still outpace the growth of developed economies. This does not change Greater China's position as an important part of Dow's strategy. However, the addition of new capacity to support growth will always be managed to deliver the product supply when needed, as is the case in all other global markets.
A2 There continues to be demand for advanced solutions and products in China, and Dow is well-positioned to deliver these through our exposure to diverse end markets, as well as exposure to resilient and varied growth sectors including packaging, water, automotive, agriculture and electronics.
Dow continues to move ahead with growth initiatives in China, and we continue to carefully evaluate timing of these investments to match market needs. However, the broad direction remains unchanged. Domestic demand in China is closely linked to economic and social reforms, and we hope to see significant progress during the period of the 12th Five-Year Plan (2011-15).
A3 We have seen a significant slowdown in demand in 2012. We do expect a mild improvement in 2013 but think this will be only gradual, and this assumes no further global economic "shocks" which we cannot rule out.
The chemical industry reflects the broad economic base of the country, as we are a key supplier to many key industries - a number of which remain quite challenged. For the chemical industry to achieve its full potential, we need to see a broad-based economic recovery versus one more narrowly driven by government-sponsored infrastructure projects.
A4 We believe the major priority should be a smooth transition of leadership, and a strong commitment to implementation of the 12th Five-Year Plan together with ongoing economic and social reforms.
A5 We believe that the emphasis on driving "quality" of economic growth versus just "quantity" is a key principle which should continue to be emphasized.
The commitment to greater innovation and nurturing value-added industries will benefit Dow and many other multinational businesses to do business in China.
president of 3M China Region and CEO of 3M China
A1 China's economy is stabilizing, and will hopefully progress through the crisis toward stronger growth, driven by huge domestic demand. For the next decade, the Chinese economy will surely sail ahead quickly yet steadily and reach the shore of a brighter future.
I'm happy to see that some promising markets in China are growing rapidly with the support of an "invisible hand", such as healthcare, new energy, automobile and environmental protection. 3M has set foot in all these areas and has unbounded confidence in the Chinese economy.
A2 "Geographic expansion" is one of the key strategic pillars for 3M in the next five years, which is designed based on our business performance and our perspectives to local markets.
3M is a company driven by innovation. Our investment in innovation is the cornerstone for business in the future. We will consistently invest in research and development, with $120 million in the next five years.
If you ask a CEO of any multinational company which is the most important country besides their home nation, it must be China. At 3M, we are here in China and for China.
A3 The third-quarter profit of 3M was up 6.7 percent as margins widen. In China, we are expecting growth of more than 10 percent this year, a little bit slower than for the past 10 years. A diversified business strategy gives us an edge over our peers.
We are dedicated to capacity expansion in China, and our compound annual growth rate is expected to reach 15 percent to 20 percent in the next five years.
A4 Each coin has two sides; diversity is a case in point. We gained tremendous benefits from our diversified business portfolios, but sometimes it may weaken your brand proposition. You can't describe 3M in a single word nor count out our 69,000 products one by one.
A5 I'm not a savant on politics but what I can tell you is that China's economy is at the stage of a soft landing.
I'm confident China's economy will pick up in the first or second quarter next year, with the new leadership and recently announced government investment plans.
We hope the new leadership can further encourage wholly owned foreign enterprises to invest in China, with favorable policies, and allow foreign direct investment in those State-owned sectors that were closed to us previously.
president of Royal DSM China and corporate vice-president of DSM
A1 China is, and will continue to be, one of the world's most important growth engines. The GDP growth rate is only one of the growth indicators. We believe China is heading in the right direction by balancing the quality of growth better.
In this year's global economy, to keep growing in the range of between 6 percent and 8 percent is healthy and already the highest rate in the world. For a life sciences and materials sciences company like DSM, China will continue to be the center of our strategy for many years to come.
A2 China is in an important phase of its development, with an improved legal and social system to benefit people's living standards. In this way, the country is creating more favorable domestic markets.
With growing needs for high-quality products and solutions on nutrition, health and new materials, China has become an even more important market for us and we will continue to expand our investment in the country to serve local needs.
A3 Many companies might face bigger challenges this year in terms of business performance, which is a reflection of the external business environment, but we still have strong confidence in the next five years of business and in our ability to achieve profitable growth overall.
The entire chemical industry in China is facing a great challenge of transforming from excessive capacity expansion to a green and sustainable development approach. We have to focus even more on achieving a balance between people, the planet and profit together, and that requires more cross-boundary cooperation between governments, local and multinational companies and non-governmental organizations.
A4 Our biggest concerns relate to research and development and technological development, and we have seen examples where people don't respect intellectual property rights, and companies which don't pay enough attention to technological development.
A5 We expect the new leadership to focus more on innovations and technological development rather than capital investment.
To achieve sustainable development, Chinese companies are encouraged to report to their stakeholders not only their financial achievements but also their accomplishments in terms of environmental and social performance.
General manager of PayPal China
A1 PayPal will remain committed to China, one of our most important and fastest-growing markets worldwide. Despite the current economic slowdown, PayPal still sees huge potential and opportunities in China.
Within our own PayPal Chinese SME (small and medium-sized enterprise) Export Survey Report, we found that although up to 79 percent of export-related Chinese SMEs believe the global economy will slow down or stay the same, seven out of 10 export-focused Chinese SMEs still expect to grow their sales in the next three months.
In fact, according to the report, e-commerce exports via PayPal's global payment platform from Greater China to overseas markets saw big double-digit growth, from 23 percent to 96 percent, from July 1, 2011 to June 30, 2012. By contrast, China's overseas shipments only increased by 7.8 percent in the first seven months of 2012, according to China's General Administration of Customs.
PayPal believes cross-border e-commerce will be a successful formula for China's SME exporters, especially when its overall export growth has experienced a decline over the past quarters.
A2 With traditional foreign trading models reaping increasingly lower profits for merchants, cross-border e-commerce is being seen as having great potential for growth, and has opened numerous new opportunities for local merchants to extend their reach beyond the China market.
Being a global e-commerce and payment leader, PayPal is helping Chinese merchants, most of which are SMEs, sell to 117 million active PayPal users in 190 markets worldwide conveniently and safely and grow their online business around the globe.
Since entering the China market in 2005, PayPal has grown in Shanghai, Beijing, Shenzhen, Chongqing, Guangzhou and Hangzhou and opened its first regional operations center, based in Shanghai.
PayPal will remain committed to growing our business and expanding our investment in China.
A3 In China, we are focusing on cross-border e-commerce. There are millions of export-oriented SMEs in China and cross-border e-commerce can provide them with a profitable channel to sell to overseas markets. We are deeply committed to enabling them to sustainably grow their online export business in a faster and safer way, sharing with them our 14 years of experience in enabling secure payments between millions of sellers and buyers on a healthy global e-commerce platform.
Looking forward, we are dedicated to bringing more global online payment best practice to China and exploring new business opportunities here.
In recent years, the growth of the global e-commerce market has made cross-border e-commerce a rising force in China's foreign trade sector, offering millions of enterprises with a brand-new business model to expand beyond the domestic market, compete globally and experience a leap in profitability.
PayPal believes cross-border e-commerce will be a silver bullet for China's exporters.
A4 We are pleased to see the government has indicated its commitment to improving the overall business and investment environment.
We always believe that a transparent and open market, where participants are judged by merit and capability, not other restrictive measurement, will greatly enable all participants to maximize their potential and ultimately contribute to China's sustainable economic growth.
A5 We would like to see the government continue its policy of opening up the market, with clear measurement in creating a favorable investment environment, and encouraging foreign participation in the areas of e-commerce and e-payment. We believe the role of government should be more than regulating the market, but facilitating and promoting foreign investment in the marketplace, too.
(China Daily 11/10/2012 page10)