According to the survey, 71.5% of respondents posted an operating profit in 2006, down more than four points from last year's figure (75.6%). This reflects struggles manufacturers had over the past year due to rising costs for materials and also higher wages.
Regarding the outlook for 2007, the number of respondents projecting worse performance (compared to last year) decreased notably in this latest survey, revealing that firms believe upward cost pressure will ease in 2007. Overall, firms are confident about their prospects in 2007, especially those in India, Vietnam, and China, where indices reached 67.6, 51.5 and 39.9 respectively.
The percentage of respondents planning to "expand their business scale" in the next few years was 58.2%, down 4.2 points from last year's survey; the percentage of respondents planning to "maintain scale of existing business," however, was higher (compared to last year's figure). Those planning to expand scale would do so primarily by "additional investment," followed by "diversifying the range of production items." In India and Vietnam, the percentage of firms planning to expand their business scale rose again in this latest survey (up 9.2 points and 3.8 points respectively).
Firms in ASEAN with a production base in China (or plans to open one) were asked to compare production costs between the two. Overall, nearly the same percentage of respondents as last year viewed ASEAN as cheaper (33.0% in 2006, compared to 33.5% in 2005). By individual country, the percentage of firms in Vietnam viewing that country as cheaper (compared to China) rose more than five points to 62.5%, reflecting rising costs in China, in particular for wages.
Among firms in ASEAN/India, 38.1% regard China as the strongest business competitor, also citing the country as a growing competitor for parts and materials, including plastics. In India, a high percentage of firms in the "automobiles/motorcycle parts" and "general machinery" industries regard local firms as their strongest competitors.
Asked about which markets firms plan to target in the next five to ten years, China and India ranked highest, followed by Thailand and Vietnam. The China market ranked highest in the electric/electronic parts category, while India topped the automobile/motorcycle parts category, reflecting the country's growing automobile and motorcycle market.
Surveyed about the impact (if any) of the rising value of the Chinese yuan (against other currencies), 25.8% of respondents in China cited "large negative impacts on their business" (a 14.5 point rise over last year’s figure), suggesting that firms have been affected by the steady climb in value of the yuan.
The survey asked manufacturers in China about measure(s) they would take in response to further increases in the value of the yuan. Most respondents (59.7%) would "reduce production costs", electing to absorb such costs rather than pass them on to consumers through higher prices.
A majority of respondents in China (73.9%) reported that production costs were the same or higher (compared to last year), with 33.9% of firms reporting that costs rose by 10% or more. The chief reasons for these higher costs, according to firms, were "rising raw material and procurement prices" (79.3%) and "increasing wages" (73.6%).
