GUANGZHOU, China (AP) -- A major U.S. business group said Tuesday an annual survey of its members shows that companies plan to invest 40 percent less this year in southern China -- a once-booming export region already reeling from a plunge in orders amid the global financial crisis.
Although thousands of Chinese factories have collapsed in the region in the past year, the 551 companies polled by the American Chamber of Commerce in South China had no plans to shut down, the group's president, Harley Seyedin, told reporters.
"We have absolutely no signs of American companies downsizing or closing," he said.
But Seyedin added that slightly fewer firms gave high marks to China's business environment. He said this was mostly because of the ongoing economic woes and the government's tendency to frequently change regulations without enough warning or input from businesses.
Many companies worry that policy making will become even more erratic during the economic downturn, he added. "Businesses can't invest when they don't know how the next regulation will affect their investment," Seyedin said.
The survey said the respondents planned to invest a total $6.5 billion this year, compared to $11 billion in 2008. Over the next three years, the companies said they planned to invest a total of $11 billion, much less than the $16 billion reported last year. The survey said 72.5 percent of the companies reported their primary focus was on providing goods and services to the Chinese market.
Stephen Joske, director of the Economist Intelligence Unit's China Forecasting Service, said apart from the global economic turmoil, investment in Guangdong was expected to fall because the economy is maturing and being restructured.
"There will be a significant drop in investment in 2009, and there won't be a major recovery for a number of years at least, said Joske. "But that doesn't mean growth in Guangdong is going to stop. It will continue growing by respectible rates by international standards, but just a lot lower than it has been used to."
Seyedin said the poll involved a wide range of companies, from those making shampoo, cameras and computers to firms offering legal and financial services. The respondents' total sales in 2008 was $26 billion, compared to $24.4 billion in 2007, the group said.
About 70 percent of the companies said they were profitable, while nearly all of them expected to be making a profit in three to five years, according to the survey. The study said 46 percent of the companies were American, while the rest came from Europe, Asia and Canada.
The sharp drop in foreign investment was the latest bad news for region -- especially Guangdong province, where most of the respondents based their China operations.
Since China began opening up 30 years ago, Guangdong has been the most prosperous and industrial province. The size of its economy has already surpassed those of Asia's "little dragons": Hong Kong, Singapore and Taiwan.
Guangdong accounts for about one-third of China's exports, but in recent months, the business has been quickly drying up as overseas demand plummets. Growth in Guangdong's exports fell to 5.6 last year, compared to 22.3 percent in 2007, the state-run Xinhua News Agency reported.
Less foreign investment this year may likely hobble the government's efforts to stoke economic growth in the province, especially in its industrial southern part, known as the Pearl River Delta.
But even before the global financial crisis began battering Guangdong, officials said they were busy revamping the economy. The bold blueprint aims to wean the province off low-value goods -- such as textiles, shoes, toys -- and shift toward high-tech and heavy industry. The province is also planning major infrastructure upgrades, including rail lines, expressways and a massive bridge linking the southern city of Zhuhai with Hong Kong and Macau.
Despite the economic turbulence, officials have said they would press on with their grand plan to remake the Pearl River Delta because the changes are essential to keeping the region competitive.
"The Pearl River Delta is at a critical stage of reforming its economy," economic planner Yu Yunzhou recently said at a briefing for the media and foreign diplomats. "This plan is a timely reaction to the current changes taking place at home and abroad."
