China's Business Owners are Most Optimistic in the World About Growth Prospects in 2006

China's Business Owners are Most Optimistic in the World About Growth Prospects in 2006

April 09, 2006

Results Show Mid-Size Businesses Surging Ahead in 2006

     -- But worries start to show about domestic
competitiveness and 
        availability of capital to continue international
expansion
     -- Nearly one in five mid-size businesses in the
survey now imports from 
        mainland China 


    HONG KONG, April 9 /Xinhua-PRNewswire/ -- The results
of the first independent survey of business owners in
mainland China show that business owners are among the most
confident in the world about the local economy with an
optimism balance* of +79% (see figure 1).  Only three out
of the 30 countries/territories surveyed -- India, Ireland
and South Africa -- were more optimistic.  And when asked
about prospects for growth in turnover in 2006, mainland
China topped the table with a balance of +86%.  This made
it the most optimistic country in the survey.

      * The balance is the different between the proportion
of businesses 
        indicating optimism and those indicating pessimism,
or between those 
        indicating an increase and t6hose indicating a
decrease


    Figure 1: How optimistic for outlook of country's
economy over the next 12 months?

     India            93
     Ireland          84
     South Africa     80
     Mainland China   79
     Philippines      71

     Figures are the % balance between optimistic and
pessimistic responses

     Source: Experian Grant Thornton 2006 International
Business Owners Survey


    Other key international economic indicators show that
the 'economic miracle' in mainland China is not just for
large enterprises but has penetrated deep into the economic
infrastructure -- with mid-size businesses performing
exceptionally well on a range of indices:

     -- mid-size businesses in mainland China are bullish
about export       
        prospects for the year ahead.  The survey balance
of +26% was one of 
        the highest among the 30 countries/territories
surveyed

     -- employment outlook is very healthy with 49% of
respondents 
        forecasting an increase in their workforce

     -- the surge in investment is set to continue - with
58% intending to 
        invest more in buildings and 53% in plant and
machinery

     -- the results show that 40% of mid-size businesses in
mainland China 
        export -- which is already near the EU (European
Union), NAFTA (US, 
        Canada and Mexico) and global averages.  However,
the percentage 
        with more than a quarter of their turnover in
exports is 45% -- much 
        lower than in the EU, for example -- but
demonstrating the 
        opportunity that exists for these companies within
their own 
        geographical boundaries

     -- however, businesses felt more constrained in their
ability to raise 
        prices, with 16% expecting to do so this year --
well below 
        companies in NAFTA and the EU.

    "Our survey demonstrates that the economic miracle
mainland China is experiencing is not only benefiting large
enterprises but is trickling through to mid-size companies.
 The survey, the first of its kind, shows that mainland
Chinese business owners are very positive about the
economic prospects for the country but there is concern
about constraints impacting the ability to grow their
business.  It is necessary for the mainland Chinese
business owners to handle those challenges carefully,"
commented Dr Tapan Datta, Experian's global economist.  

    But there are problems beneath the surface

    Despite the optimism, however, business owners in
mainland China have significant worries about constraints
on their businesses continuing to expand (see figure 2):


    Figure 2: Main constraints on business expansion

                 Cost of Shortage Shortage  Regulations
Availability Shortage 
                 Finance   of       of       /red        of
skilled  of order/
                         working  long term   tape      
workforce   reduced       
                         capital   finance                 
          demand 
                                                           
     
    Global            
     ranking
     of mainland                                           
             
     China          4       2        5          15         
 9          4                                               
      
    % of             
     respondents 
     in mainland                                           
      
     China citing                                          
           
     constraint*   39      39       32          34         
37         44                                               
     
    % of             
     respondents                                           
               
     globally                                              
             
     citing                                                
              
     constraint*   21      22       19          35         
32         29                                               
    

    * % of respondents rating the constraint 4 or 5 on a
scale of 1 to 5 
      where 1 is a minor constraint and 5 is a major
constraint 
     
    Source: Experian Grant Thornton 2006 International
Business Owners Survey


     -- a high proportion of mid-size businesses in
mainland China are 
        clearly worried about a wide range of factors and
are among the 
        most concerned in the world about constraints to
expansion

     -- in a listing of 30 countries/territories, mainland
China comes 4th 
        in the table citing 'cost of finance' as a
constraint to business 
        expansion, 2nd for 'shortage of working capital',
5th for 'shortage 
        of long-term finance' and 9th for 'availability of
skilled 
        workforce'

     -- 39% of business owners were worried about 'cost of
finance' as a 
        constraint to business expansion, 39% about
'shortage of working 
        capital', 32% about 'shortage of long-term finance'
and 37% about 
        the 'availability of skilled workforce'

     -- in addition, 34% were worried about regulation and
red tape and 
        nearly half (44%) about shortages of orders and
reduced demand 
        (particularly due to increased domestic
competition).

    International engagement with mainland China

    The survey asked the owners of mid-size businesses
around the world what the impact of the 'Chinese economic
boom' had been on their businesses.  The majority (13
countries/territories) felt that they had experienced
increased business as a result.  This category included the
majority of Asian countries in the survey, with Hong Kong
(53%) leading the way; as well as Australia, the US,
Argentina and Mexico; and Germany, the Netherlands and
Sweden in Europe (see figure 3); a group of 12
countries/territories felt they were largely unaffected,
mostly from Europe; only a handful felt they had been
adversely affected.  (See Figure 3)

     Figure 3: Impact on business of the 'Chinese economic
boom' (% balance*)

        Increased business     Largely unaffected      
Decreased business    
 
         Hong Kong    53        Canada         7        
Poland     -9 
         Malaysia     22        Ireland        1        
Turkey    -16 
         Australia    19        UK             1        
Botswana  -31 
         US           19        Greece         0        
Thailand  -39 
         India        15        Luxembourg    -2           
          
         Singapore    15        Russia        -2           
          
         Netherlands  13        Japan         -4           
          
         Philippines  13        Taiwan        -4           
          
         Germany      12        France        -6           
          
         Mexico       10        Spain         -6           
          
         Sweden       10        South Africa  -7           
          
         Argentina     9        Italy         -7           
          
         New Zealand   8                                   
          

    * the balance is the difference between the proportion
of businesses 
      indicating an increase and those indicating a
decrease 

    Source: Experian Grant Thornton 2006 International
Business Owners Survey


    Desmond Yuen, Partner and Head of China Services at
Grant Thornton, added:  
    "It is interesting to note how the world is
adapting to the growth of mainland China -- both NAFTA and
East Asia are receptive to mainland China but Europe is
being more cautious about embracing the opportunities that
trade with mainland China presents."

    When asked whether mainland China was an opportunity
for their businesses, more than a third of mid-size
businesses in NAFTA and East Asia responded positively --
reflecting how engaged they are with mainland China and how
important it is to their future. 

    Mainland China's growing importance in international
trade is demonstrated by the fact that nearly one in five
mid-size businesses in the survey now imports from mainland
China.  It is ahead of the other major growing Asian economy
-- India -- when compared by imports.  Worldwide, some 14%
of mid-size businesses in the survey also export to
mainland China.  In Taiwan, the US, Germany and Italy, this
rises to one fifth of all respondents.  This ranks mainland
China fourth as the top export destination in the survey --
compared with sixth in 2003.

    The survey also revealed that one in ten of mid-size
businesses worldwide had outsourced operations to another
country/territory.  Hong Kong topped the outsourcing table
(26% of businesses) followed by the US (18%).  The leading
destination for outsourcing anywhere in the world was
mainland China -- with a third (31%) of respondents already
transferring or planning to transfer operations.  India was
next (27% followed at a distance by Mexico (8%) and
Malaysia (5%).

    Notes to editors 

    About the Experian Grant Thornton International
Business Owners Survey    

    Entering into its 4th year, the Experian Grant Thornton
International Business Owners Survey (IBOS) was carried out
among 7,000 owners of mid-size businesses from 30
territories/countries during late 2005.  Among them, 300,
250 and 150 mid-size businesses were surveyed in the
mainland, Hong Kong and Taiwan respectively.  IBOS began in
2002 and builds on the European Business Survey (EBS) which
Grant Thornton ran from 1993 to 2001.  The research was
conducted by Experian Business Strategies Limited and
Harris Interactive. 

    About Grant Thornton

    Grant Thornton is one of the leading accounting, tax,
and business advisory firms dedicated to serving the needs
of entrepreneurial and owner managed companies.  In Hong
Kong and mainland China, Grant Thornton has offices in Hong
Kong, Beijing, Shanghai, Guangzhou and Shenzhen, employing
in excess of 500 people.  Grant Thornton in Hong Kong is a
member of Grant Thornton International -- one of the
world's leading organisations of independently owned and
managed accounting and consulting firms providing
assurance, tax and specialist advice to independent
businesses and their owners.  Firms operate in 112
countries in 519 offices.  For more information about Grant
Thornton go to http://www.gthk.com.hk .

    About Experian

    Experian provides comprehensive understanding of
consumers, markets and economies in the UK and around the
world, past, present and future.  The business is a market
leader in consumer profiling and market segmentation,
economic forecasting and public policy research, supporting
businesses, policy makers and investors in making tactical
and strategic decisions.  Experian's economic forecasting
arm, Business Strategies, has operations in sixteen
countries: UK, France, Netherlands, Spain, Norway, Sweden,
Finland and Hong Kong -- China, Germany, Czech Republic,
Ireland, Greece, USA, Japan, Australia and New Zealand. 
For more information about Experian go to
http://www.experian.com.hk/ebs .

    For further information, please contact:

    Grant Thornton
     Desmond Yuen                            
     (Partner & Head of China Services)                
                                          
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     Fax:   [phone]
     Email: [e-mail]

     Estella Tsui                
     (Marketing Manager)         
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     Fax:   [phone]
     Email: [e-mail]               

    Experian
     Dr Tapan Datta                       
     (Global Economist)                   
     Tel:   [phone]              
     Email: [e-mail]   
                                                           
             
     Bruno Rost                           
     (PR Manager)                         
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SOURCE  Grant Thornton