China continues to be a top investment destination for multinational companies. This is according to an annual survey by the Economist Corporate Network released earlier today. The report warns, however companies operating in the world's second largest economy may under-perform.
The Asia Business Outlook Survey reveals how regional business leaders are investing and managing their operations in the Asia Pacific region.
It points out that Western multinational companies or MNCs are enthusiastic about their investments in China, as they predict considerably higher sales growth in emerging second and third tier cities than the markets of first tier cities.
But analysts have a word of caution. They note that many MNCs are not decentralizing operations fast enough, and that companies focus too much on cities like Beijing and Shanghai.
From a broader angle, the survey indicates that executives are buoyant, and firms are forecasting a faster sales growth in 2013 than 2012 in the Asia-Pacific region excluding Japan. For the 170 non-Asian companies participating in the survey, Asia’s share of global revenues rose from 19 percent in 2011 to 22 percent in 2012. Companies expect this figure to reach 32 percent by 2017.
Despite the optimism, however, companies are not moving fast enough. For many global MNCs, their rate of growth lags behind the economic growth rate. That’s to say, while they are in the race, they are off the pace.