beyondbrics

Hope springs eternal: multinational companies are counting on China to save them from the global financial crisis – just as their ability to compete on the mainland has eroded more than ever before.

According to a survey of foreign companies in China published on Wednesday by the Economist Intelligence Unit, three quarters of the biggest companies surveyed said that the fallout from the financial crisis had made them raise their sights on China.

But their relative strength in the China market is not keeping pace with those expectations. “Multinational corporations’ traditional competitive advantages are beginning to erode in China,” the survey found. “It is often taken as fact that multinationals have superior technology and better brand management, and hold more appeal for talented workers” – but there are signs that foreign companies are losing all those advantages now.

In an extraordinary admission of their own weakness, only one quarter of companies surveyed with revenues over $5bn said they had better technology or stronger brands than their local rivals. And any local headhunter will tell you that Chinese talent these days increasingly prefers domestic companies – even the much maligned state-owned enterprises – over the multinationals that used to be everyone’s dream bosses.

But whatever their deficiencies, over 60 per cent of those surveyed are nonetheless expecting China to become their largest market within 20 years – even though only 8 per cent say it is currently their top market. Maybe the alternative is just too depressing to contemplate.

Related reading:
Hong Kong: still the great mall of China, beyondbrics
China: easing, but this is not 2009, beyondbrics
US-China trade ties: A heated exchange, FT