By Zhan Lisheng (China Daily)
Updated: 2008-04-09 06:42

GUANGZHOU: Most foreign-funded enterprises in South China plan to increase investment substantially - rather than move elsewhere as reported by some news media - according to a survey released Tuesday.

The survey, conducted from Jan 22 to March 7 by the American Chamber of Commerce in South China (AmCham South China) in partnership with Hewitt Associates Consulting (Shanghai) Co Ltd, polled 419 firms in which members of AmCham South China have invested, as well as joint ventures and representative offices in South China.

The results run counter to reports suggesting that a growing number of foreign-funded enterprises in the Pearl River Delta region and other parts of South China are moving away because of government macro controls and implementation of the new Labor Contract Law which they fear would add to operation costs.

According to the survey, the foreign-funded enterprises plan to increase investment by at least $16 billion over the next three years, part of which will come from profits of on-the-ground operations.

And 90 percent of the firms polled said they have been making profits or would become profitable within two years.

"The results indicate a high level of satisfaction with, and optimism in, the business environment in South China," said Harley Seyedin, president of AmCham South China.

The message is particularly important as the enterprises have been affected by policies such as those affecting processing trade and value added tax rebate, the yuan's appreciation, price hikes of raw materials, and implementation of the new Labor Contract Law, he said.

He said fewer than 10 percent of the firms said the policy changes had a significantly negative effect on their business operations.

However, he suggested that the new Labor Contract Law be amended, saying different occupations as well as different regions of the nation be treated differently; and an adequate transitional period be given for foreign-funded enterprises to adapt to the policy changes.

According to the poll results, government regulatory changes are ranked the biggest obstacle to corporate growth, followed by rising labor costs and the exchange rate.