According to a survey by the American Chamber of Commerce in Guangdong (AmCham) on the business climate in the Pearl River Delta (PRD) area, which was released yesterday in Guangzhou, PRD is still a dynamic pool of foreign investment, in particular, those from the United States.

Among the 161 foreign-invested companies surveyed, 90 percent of the U.S. companies described the business climate in PRD as good, very good or even outstanding. Nearly 50 percent marked the climate as very good or outstanding.

The top reason for the companies surveyed to set up their PRD-based operations was the opportunities in PRD's domestic market, an interesting phenomenon new to similar surveys conducted previously, according to AmCham president Harley Seyedin.

"It indicates that more multinational companies are enhancing their presences in this region as an important base to expand into the Chinese market," said Christian Doeringer, president of Hewitt Associate, which helped Amcham in undertaking the survey.

The proximity to Hong Kong of this region is still a major attraction for foreign-invested companies, ranking the second among the top five reasons for choosing PRD instead of other regions. The other three are lower production costs, better infrastructure and greater openness.

While 16 percent of the companies surveyed have been in China for less than five years and 8 percent have here for less than two years, 76 percent of them are already profitable. Eight percent expect to become profitable by next year, 7 percent expect to be profitable within two years, 4 percent within three to five years, and less than 2 percent expect to take longer to become profitable.

The sampled companies are members of the AmCham and members of the Multinational Corporation Club of Guangzhou, which are evenly distributed in the manufacturing and service sectors with a great variety of company sizes.

More than 60 percent of the companies will each invest up to an additional US$10 million in China in 2006.

The survey showed that U.S. companies operating in PRD are positive about the reforms carried out by Chinese governments at all levels in the past five years.

Government regulatory issues, however, top the major three business obstacles in the region. "Our members hoped the government could publish its future plan of policy change in advance and seek opinions from enterprises to increase the transparency," said Seyedin.

Interestingly, the growing local competition has become the second challenge to U.S. companies, a sign that many Chinese companies are becoming international-level players and the Chinese economy more close to a market economy, said Dien Ly, economic consul with the U.S. consulate general.

Seyedin advised the companies to take adequate measures against any potential outbreak of avian influenza as 54 percent of the interviewees have not developed such plans yet.

Editor: Yan