US firms in China remain upbeat despite challenges

American companies say nation will stay as an investment priority amid economic slowdown

Despite the mainland's economic slowdown and increasing competition from local companies, most US businesses in China remain profitable and are optimistic about the market, according to the latest survey by the US-China Business Council.

The 2016 China Business Environment report, a USCBC annual membership survey, found that 90 percent of companies remained profitable, but at lower margins that reflected increasing competition, rising costs, regulatory hurdles－and in some sectors, overcapacity.

The 90 percent profitability level is the second highest in the last five years, surpassed only by the 91 percent in 2013, according to the survey released on Tuesday.

About 30 percent of the companies expected increased profitability in the current year, while 35 percent expected the same as the previous year. The remaining 35 percent expected profitability to fall.

While China's economic slowdown is impacting US company financial and market sentiment, the report found that some 62 percent of the surveyed companies anticipated continued growth this year, 21 percent expected no change, and 17 percent expected a revenue decline.

It found that 65 percent of companies surveyed reported revenue rises in 2015, while 10 percent saw no change, and 26 percent saw sales fall.

In other finds, the survey revealed that about 36 percent of the companies expected their head count to increase this year, while 44 percent expected no change, with the balance expecting some staff contraction.

On the five-year outlook for business in China, optimism prevails. The findings were that 72 percent of companies were optimistic or somewhat optimistic, while only 10 percent were pessimistic or somewhat pessimistic.

Despite the headwinds of the economy and competition, China remains a priority market for most US companies, according to the survey, which is in its 11th year.

About 17 percent said China was their companies' top priority, while 67 percent said China was among the top five priorities and 12 percent considered China one of many priorities. Only 4 percent said China was not a priority.

On capital expenditure, a total of 85 percent of the companies responded that they did not reduce or stop planned investments in China in 2015.