Foreign firms upbeat on China business

BEIJING -- Mercedes-Benz looks to be heading for double-digit growth this year in China, the world's largest auto market.

Ni Kai, president and CEO of Beijing Mercedes-Benz Sales Service Co Ltd, said that the company is confident of its performance in 2014, after over 23,000 Mercedes were delivered in May, up 30 percent year-on-year.

This optimism is not rare among foreign firms, despite an apparent economic slowdown, or -- as President Xi Jinping puts it -- a "new normality": slower growth, structural reform, no big stimulus.

A business confidence survey by the German Chamber of Commerce in China this month showed 90 percent of business planning to keep or expand their business this year, with nearly 60 percent hoping to achieve or exceed their targets. In terms of reform, 70 percent are optimistic, saying domestic consumption, environmental protection, and emphasis on the market will be good for business.

Another Chamber of Commerce, this time the Americans in Shanghai, expect one fifth of American companies chose China as their "first investment destination", and 48 percent plan to increase investment here.

Confidence in the economy comes from an increasing number of middle-income consumers and stable growth in second and third tier cities.

Disney's plan to increase investment in their Shanghai project and a joint venture between Microsoft and BesTV in the Shanghai Free Trade Zone are signs of foreign companies' inclination to invest.

Jin Yuanpu of Renmin University believes consumption is shifting from basic daily needs to the higher end, particularly services, and growth potential is far from exhausted.

A research note from the Peterson Institute for International Economics said that Chinese leaders may be willing to accept slower growth as long as labor market indicators look stable and only structural reform can ensure a healthy labor market.

This analysis is broadly correct, and a welcome sign of better management of the economy.

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