According to the European Chamber’s “Business Confidence Survey 2007,” which was generated from the responses of 211 European companies, Shanghai is the preferred location for a company’s Chinese headquarters, followed by Beijing. However, more firms are moving their sales and services outlets to “second-tier” cities. Sixty-nine percent of respondents planned to increase their investments in China over the next two years; within this group, 59% planned to expand into new cities in China. The most common reasons that surveyed companies gave for investing in R&D in China were to reduce development costs for products for the Chinese market (30%) and to adapt products to Chinese tastes and standards (28%). Respondents said that, compared to Europe, recruiting and retaining a qualified staff was difficult, particularly in management and marketing positions. All of the companies surveyed predicted that labor costs would increase over the next two to three years, with 45% expecting a 5%–10% increase and 35% planning for a 10%–15% rise.

Source: European Chamber