Why China?

Sterling, a U.S. based human resource company, was first enticed into China in 1990 as the principal executive recruiter for a multi-national client that had undertaken extensive due diligence regarding the China marketplace. The client was willing to gamble that certain political changes and economic reforms would take place in the 1990’s that would allow for China’s transition to an industrial market economy.

Sterling having successfully completed its initial recruiting assignment, and having done its own due diligence, decided to stay in China and participate firsthand in China’s future growth. In 1992 Sterling Enterprises Beijing became the first foreign enterprise human resource company authorized to do business in the Peoples Republic of China. In 1995 we expanded our China operations by opening an office in Shanghai and in 2002 we formed the first human resource China Joint Venture in Shanghai.

China is now the sixth largest economy in the world and is predicted to be the fastest growing major economy over the next decade. China’s new leadership is challenged to accelerate economic reform and to continue to open domestic markets to foreign competition. China’s business activities have quickly shrugged off the disruption caused by the SARS outbreak and to date has provided a safe haven from terrorists for foreign businesses and their employees.

Contracted foreign investment, a sign of future investment, gained 34% in 2003. According to the latest forecast of the International Monetary Fund, China’s Growth Domestic Product (GDP) is expected to grow on an average of 8.5% in 2004 and continue to expand at the same or a greater annual rate through to the Olympic year 2008.

Although some risks remain in doing business in a communist country, strong economic growth has led to optimism among foreign companies doing business in China. Economic, demographic and cultural conditions have improved substantially during the 1990’s. An American Chamber of Commerce survey indicates that 93% of the foreign companies surveyed indicated an optimistic outlook for business in China over the next decade.

Trends in foreign investment in China reflect this underlying optimism:

v In 2003 China became the number one destination for foreign investment surpassing the USA with USD 52.74 billion. The predicted figure for 2004 is USD 60 billion.

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v 17% of the foreign direct investment in China in 2002 and 2003 occurred in Shanghai. That trend is predicted to continue.

v China‘s foreign trade continues to expand rapidly. The value of China’s total exports has been increasing 35% year on year.

v 80% of foreign companies surveyed by the American Chamber of Commerce in 2003 reported that growth in China based revenues and profit margins in China exceeded their company’s worldwide performance.

As a result of the extremely positive economic and demographic outlook for China, Sterling will continue to focus on the China opportunity. The Shanghai office will be the principal business development office in China and is now staffed to provide a wide range of human resource services including China entry consulting services.

Bob Macdonald is the founder of the Sterling companies. Sterling, originally incorporated in Arizona, has been in the human resource business since 1982. Sterling headquartered in Phoenix was the first foreign executive search firm to open in China. Sterling now operates branch offices in Beijing, Shanghai, Tokyo, Singapore, Hong Kong, Mumbai, Seoul, Leeds, and London.

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