The four-question study, unveiled at the organization's July discussion group in Irvine, Calif., was conducted online at the ESCA website from July 2 to July 15. Participants were asked to check all that apply for each of the four questions. ESCA received 52 respondents.
Asked how China fits into the company's overall business plans, 57.7% of survey respondents said they expect to expand existing operations, 17.3% are planning future operations, 13.5% will maintain present levels, and 11.5% are investigating possibilities.

Choosing to start a company in China as a wholly owned foreign enterprise took the majority vote of 45.8% when asked how will/is the company structured in the region. This compares with the decision by 31.3% of the participants to either outsource or partner, 10.4% to form a joint venture. Another 10.4% indicated "other," and 2.1% said they have or would acquire a Chinese enterprise.

Global competitiveness, according to 67.3% of the survey participants, is considered the biggest opportunity to setting up an operation in China. This compared with 59.6% who indicated labor savings, while 51.9% named close proximity to customers, 46.2% said it gave their company entrance into the domestic Chinese market, 34.6% indicated they could find cheaper raw material in China, and 5.8% identified other major opportunities.

Logistics in and out of China, as well as the country's political and economic climate were ranked the top two concerns among survey participants. Both categories received 57.7% of the vote. Technology theft and transfer was second with 46.2%, duties and taxes were of concern to 36.5%, lack of adequate market understanding 30.8%, material quality 26.9%, labor skills 11.5%, and other 3.8%.

Gloria Kamph, president and chief executive at Interliance LLC, Costa Mesa, Calif., said some key supply chain and logistics concerns include availability of logistics services and the transportation infrastructure in China, customs procedures, cargo tracing, "runaway" costs, and time to market for end products.

"China is planning in the near future to setup logistics hubs in Beijing, Tianjin and Shanghai to ease the flow of goods into and out of the country," said Kamph, whose consulting firm has worked with the Chinese government for many years. "Once they do this, the price to set up a business in these areas will be a little higher, but it will offer companies better service."

Mohammad Ibrahim, director of manufacturing services and corporate information services at National Semiconductor Corp., Santa Clara, Calif. discussed the supplier's decision last year to build a 3 million sq.-ft. manufacturing facility in China's Suzhou Industrial Park, scheduled for completion in April 2004.

Some of the challenges National encountered, Ibrahim said, were government rules and regulations, exports and import licenses, and security issues. For example, Internet censorship will require much tighter controls, and the supplier must assume that all data flow to and from National will be intercepted by Chinese government agencies, he said.