McKinsey Quarterly says:

How do your operations in China stack up, measure by operating measure, against what your company is doing in Europe, Japan, and the United States? This may be a more critical question than you realize: within a decade, if your organization in China isn't a star in your company's performance firmament, you may be in trouble—globally.

This question is also a very complex one to answer. Thousands of multinational companies of all sizes, including more than 460 Fortune 500 companies, now operate in China, and many are doing just fine. The American Chamber of Commerce in China conducts an annual business climate survey, and in its most recent one (which took place in 2006) 64 percent of the member companies reported that business in China was profitable or very profitable. One out of three said that their operations in China had higher margins than their worldwide organizations did, and another third reported margins on par with the global average.

But the conditions for success in China have been changing. Many multinational companies are expanding across the country to ever-smaller cities and towns, establishing positions to serve fast-growing segments of the Chinese middle class and small- and medium-sized businesses. In the process, they frequently incur greater sales, marketing, and distribution costs and take on new organizational challenges as they try to understand—and meet—the needs of customers in such markets. Moreover, they're encountering stiff competition from regional and national domestic Chinese rivals, which frequently know these customers better, have long-established business relationships in local markets, and compete relentlessly on price in places where consumers typically have much less money to spend than those in the big cities.

To read more:

http://www.mckinseyquarterly.com/Operations/Performance/Bringing_best_practice_to_China