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| Friday, 22 February 2008, 23:21 HKT/SGT | |
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Source: JETRO | |
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TOKYO, Feb 22, 2008 - (ACN Newswire) - The Japan External Trade Organization (JETRO) released the results of its latest survey of Japanese-affiliated firms operating in six ASEAN countries (Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam), mainland China, Hong Kong, India, the Republic of Korea (ROK) and Taiwan. The survey*, conducted between October and December 2007, received valid responses from 1,745 companies, or 38.3% of the 4,559 firms sent questionnaires.
According to the survey, 69.9% of respondent manufacturers in Asia expect to post an operating profit in 2007. This comes amid a difficult business environment marked by upward pressure on procurement costs due to soaring resource prices. By country/region, high percentages (of respondents expecting to post profits) were recorded in Singapore, Vietnam, India, Hong Kong, Taiwan and ROK. In Vietnam, India and Hong Kong, some two-thirds of respondents (in each location) expect improved profits over 2006, indicating a steady profit growth trend in these countries/regions.
Among non-manufacturing firms operating in Asia, 69.5% of respondents expect to post an operating profit in 2007. In China, where firms are working to develop domestic markets and build sales networks, 62.8% of firms expect to post an operating profit, while only 29.2% of non-manufacturing respondents in Vietnam expect a surplus in 2007 (this contrasts with the high figure expected among manufacturers in Vietnam).
Regarding the outlook for 2008 (in terms of DI**), manufacturers, in particular those in Vietnam and India, showed increased expectations for improved profits over 2007, mainly through "improving production efficiency" (48.8%) and "increasing export sales" (43.7%).
The percentage of respondents planning to "expand their business scale" in the next few years was 62.1%, with more than 90% of respondents in India and Vietnam answering positively to this question, revealing the trend in these countries towards improved profit performance and higher revenues. Meanwhile, the percentage of manufacturers in China planning to "expand their business scale" decreased for the fourth consecutive year, to 65.9%, down from 80% in 2004. This underscores a continued downturn in expansion among manufacturers, in particular export-oriented makers of apparel items and low value-added electric machinery.
Manufacturers were asked which country(s)/region(s) they planned to target as a production base in the next five to ten years (firms could select their host country/region). China ranked highest, followed by Vietnam, Thailand and India (Vietnam surpassed China if votes for host country are excluded). Thailand and China ranked highest among automobile and motorcycle parts makers, with the two countries accounting for nearly 60% of respondents in this industry, followed by India (10.1%) and Vietnam (10.1%), where domestic auto and motorcycle markets are rapidly expanding. These figures reflect the growing trend among automobile makers to increase their production in China, ASEAN and India. These destinations also ranked highly among other auto-related manufacturing industries, such as chemical products and general machinery. Moreover, China and Vietnam (combined) were selected by more than 50% of respondents in the electric machinery & electronic equipment and electric & electronic parts and components industries.
Firms were asked to name the specific functions they intended for these targeted production bases. Top choices for firms selecting China were "production base for mid to low-end products targeting the domestic market" (50%) and "production base for high value-added products targeting the domestic market" (46.7%), revealing the increasing importance Japanese firms place on China's domestic market. Firms choosing Thailand for a future production base plan to make "high value-added export products" and "mid to low-end products targeting the domestic market" (39.1% for both choices), showing Thailand's importance both as a domestic market and export base.
Asked which markets firms plan to target in the next five to ten years, China ranked highest overall at 52.6%, followed by India (40.4%), Vietnam (28.9%) and Thailand (21.8%). China was valued particularly highly, with more than 70% of respondent manufacturers in Northeast Asia citing the country as a target market, (73.6% of those already operating in China cited the country as a target market). Meanwhile, India was also valued highly, with 73.1% of respondents in that country naming India as a target market; it was also cited by large percentages of firms in ROK (64.0%), Singapore (59.7%) and Thailand (44.5%).
In the 2007 survey, manufacturers in China are asked about the impact (if any) of the unification of corporate income tax rates (for domestic and foreign firms), the introduction of a new labor contract law, reduced refunds on value-added tax and also the rising value of the Chinese yuan (against other currencies). The new labor contract law was cited by most (nearly 80%); this includes firms who chose "large negative impacts on their business" or "negative impacts". One respondent expected the new law to raise their personnel costs by 8% per employee.
Firms also expressed their concern about possible declines in operating profits due to increased costs and other issues, such as additional expenses for retirement allowances and trade union-related issues. The rising value of the yuan received the highest percentage of firms citing "large negative impacts", at 37.4% of respondents. These figures show the overall impact changes in China's legal and administrative systems have had on Japanese manufacturers in China.
Amid such a difficult business environment, Japanese manufacturers in China are looking to improve operating profits by boosting production efficiency and increasing sales in the country's domestic market. As pointed out above, a number of manufacturers in China are eyeing the country as a production base targeting the domestic market, in particular makers of high value-added products. This reflects China's changing investment environment.
* This survey has been conducted every year since 1987. This is the first year that non-manufacturers (e.g., trading companies, wholesale/retail trade and transport/warehousing and telecommunications) were included in the survey.
** DI, or diffusion index, refers to the difference between the ratio of positive ("better") and negative ("worse") responses.
Contact:
Japan External Trade Organization (JETRO)
Asia and Oceania Division
TEL: +81-3-3582-5179
China and North Asia Division
TEL: +81-3-3582-5181
E-mail: pressdesk@jetro.go.jp
http://www.jetro.go.jp
Topic: Awards
Source: JETRO
https://www.acnnewswire.com
From the Asia Corporate News Network
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