There's a strong sense among foreign multinational executives that the door of opportunity is wide open in China, even as fears of recession have clouded growth prospects in the United States and Europe. This optimism is increasingly at odds with the view of China's CFOs, many of whom are worried that China's growth is unstable and could collapse.
For the rosy picture, look to Siemens, the German industrial and technology powerhouse. Its senior executives announced in late November that they fully expect to meet their ambitious China growth goals, reaching more than $13 billion in new orders of everything from locomotives to baggage-handling systems by 2010.
Siemens is not alone. Many global companies, from McDonald's to Caterpillar, are counting on revenue growth in the developing world, especially in China, to make up for revenue shortfalls in the United States. Some economists say that Asia has "decoupled" from the United States, primarily due to China's growth engine.
This view of a robust, resilient China stands in contrast to a growing concern among China's CFOs. In a survey last month, CFO China asked 350 finance chiefs about the dangers to growth that they perceived at their own firms. Some 51 percent said they thought their companies' growth was out of control. They worry that the pace of growth makes it impossible to introduce adequate internal controls or to ensure that growth contributes to profits.
Moreover, some 40 percent of CFOs said that at least 10 percent of their company's profits resulted from speculative activities in China's two bubble markets, the Shanghai stock exchange and real estate. A Morgan Stanley study released this past summer pegs the figure higher, saying that half of the profit growth in China's corporate sector in the first half of 2007 came from speculation.
It may seem strange that China's corporate captains would bet their shareholders' money with such breathtaking recklessness. But why not? Most successful companies in China today grew up fast in an economy charging ahead at more than 8 percent GDP growth per year. They learned to manage in a bubble; for some, that's all they've ever known.
China's CFOs are wary. They know they will be held responsible for the value destroyed when the heady days end. There's a sense of vertigo among them. Before painting positive pictures of China's growth to their boards, U.S. CFOs should sit down and exchange views with their counterparts from the mainland over a cup of tea. Or a drink — they may need one.
Wu Chen is editorial director of CFO China.