|China World Trade Center|
Despite several factors in the Chinese economy which point to a slowing of development, a full three quarters of European investors will continue to make China a top destination for their money, according to the European Chamber of Commerce’s annual business survey which was released on May 29th.
The top risks for investors in the China market were seen as the slowing down of the economy there as well as increased labor costs for companies.
The president of the COC, Davide Cucino explained:
"A previously reliable stream of foreign direct investment (FDI) may slow and planned investments may be shifted to other emerging markets if reform continues to stall and costs rise."
Of the 557 investors taking the survey, 63 percent cited increased labor costs as a prominent concern, with a special worry about the Pearl River Delta in South China.
European companies are more often using cost reduction as a primary strategy for increasing competitiveness. The survey showed that a larger number of companies are trying to cut costs instead of increasing income.
The director of the Research Center of Transnational Corporations at the Chinese Academy of International Trade and Economic Cooperation, Wang Zhile explained that it was normal for companies concerned with cost to relocate their enterprises to the lower-wage locales in places like Southeast Asia.
“However, even for cost-oriented companies, a better price-performance ratio is more important than lower labor costs. Given China's labor productivity, rising wages are still acceptable," commented Wang.