US companies in China were profitable in 2011 despite having to confront rising costs and little improvement in the regulatory environment, a survey by the American Chamber of Commerce in Shanghai revealed yesterday.

The survey showed that 78 percent of the respondents said they were "profitable" or "very profitable" in 2011, down 1 percent from an all-time-high achieved a year earlier. The companies which reported a revenue increase fell to 80 percent from 87 percent in 2010, according to the China Business Climate survey of 315 US-based companies with branches in China.

"2011 was good, but not as good as 2010," said Kenneth Jarrett, chairman of AmCham Shanghai. "Still one-third of our respondents said China is a significant source of profits for their US head offices."

But business challenges abounded as 91 percent of the companies singled out rising costs as a major hindrance to their business, replacing human resources as the top concern for the first time. Two-thirds said they expected costs to rise even more this year.

The companies, however, saw little improvement in legal and regulatory matters as 71 percent said China's regulatory environment was the same or deteriorated, up from 63 percent in the previous year's survey.