"The results clearly show that European companies are confident about China's growth perspective and that the Chinese market offers many opportunities," said Charles-Edouard Bouée, Asia President of Roland Berger Strategy Consultants and co-organizer of the survey.

But growth is only one side of the coin. "In the long run it is profitability that determines the success of a company," he said. "One factor impacting this sentiment is rising competition. As the Chinese market matures, so do domestic competitors, who are perceived to be a risk for future business by 58 percent of respondents."

European companies need to "raise their game" in China and continue to differentiate their products and services in this complex market, he added.

Hot Problem

The State Administration of Foreign Exchange (SAFE) this year launched an investigation into hot money in 13 provinces and municipalities, and uncovered 190 illegal cases involving $7.35 billion, said Deng Xianhong, SAFE Deputy Director.

While the speculative capital is sneaking in, there are no signs of massive flows of the hot funds, he said.

Much of the capital found its way into the stock and real estate markets of China to cash in on the country's economic boom. In addition, an expected appreciation of the yuan offers a risk-free source of profit, said Deng. Usually through companies overstating foreign direct investment or over-invoicing exports, speculators are able to dodge regulatory controls, he said.

It is necessary now to step up a stringent handle over the hot money and fend off simmering financial risks, said Deng.

Meanwhile, there is a growing need to further improve the renminbi exchange rate regime and strike at illegal financial activities, he added.

Steel Independence

As international iron ore prices continue to soar, Chinese steelmakers are gearing up to wean themselves off their dependence on imports for raw materials.

The Liaoning Province-based Angang Steel Co. Ltd., the nation's fifth largest steel mill, aims to double its output to 92 million tons by 2020. In another move, the Benxi Iron & Steel Group Co. Ltd. (Bxsteel) is working to develop the Dataigou Mine, the world's largest iron ore reserve near Benxi, Liaoning Province. It plans to triple its iron ore production to 60 million tons by 2012.

China relied on imports for 70 percent of its iron ores in 2009—and this dependence has put steelmakers in a tight spot as global miners are expected to demand a 30-35 percent price increase for the third quarter for 2010. In addition, they are pushing for a new quarterly pricing system linked to the volatile spot market.

"We can't just wait around and let soaring costs eat up our profits," said Gao Lie, Chairman of the Board of Bxsteel. "We need to dig for more deposits on our home soil."

Chinese steelmakers must be more innovative in technology research and lower the costs of iron ore exploration to be successful with its mining operations, said Wang Guoqing, an analyst with the Beijing-based Lange Steel Information Center.

Auto Refuge

For global auto giants struggling after the sweeping industry meltdown, the thriving Chinese market has become a safe haven.

General Motor's sales in the Chinese market totaled 1.21 million vehicles from January to June, topping the U.S. deliveries of 1.08 million.

This is the first time any overseas market has "consistently outsold" GM's home market in the carmaker's 102-year-old history, said Michael Albano, a Shanghai-based GM spokesman.

Also basking in the China boom was Ford that saw its first-half sales in the country surge 53 percent year on year to reach 301,524 units.

Such explosive growth in China coincided with deep gloom in the United States where consumers hunkered down in the wake of the recession.

Also, as a vivid illustration of how fast the axis of the global auto industry is shifting eastward, China toppled the United States earlier this year from its decades-long position as the world's largest auto market.