Western companies have long viewed China as a strategically important market. But “strategically important” often implies big things in the future, but profitless for now. They all believed the scale and depth of China’s market, but had no idea how and when they can generate profits from it. That was the popular view in late 90’s. In a 1998 survey, one third of multinationals were losing money in China, and another quarter of them were barely making even.
Now it’s a totally different story. The latest survey says 83% of the surveyed companies’ China operations were profitable in 2006. At the mean time, 58% of the companies enjoyed an increased profit from China.
Here’s an extreme example. The Yum Brands, which owns KFC and Pizza Hut restaurants would report an operating loss if not counting the $65 millions operating profits from China. People at KFC certainly know better how strategically important a market China is now.