SHANGHAI, Sept 19 (Reuters) – Political tensions and a slowing economy are sapping the confidence of U.S. businesses operating in China, with the number of companies optimistic about their five-year outlook falling to a record low, a survey published on Tuesday showed.
Even after the ending of COVID curbs, which weighed heavily on revenues and sentiment in 2022, the percentage of surveyed U.S. firms optimistic about the five-year China business outlook fell to 52%, according to the annual survey published by the American Chamber of Commerce (AmCham) in Shanghai.
This was the lowest level of optimism reported since the AmCham Shanghai Annual China Business Report was first introduced in 1999.
“Frankly, if there was one thing that surprised me about the survey this year it was that number,” said AmCham Shanghai Chairman, Sean Stein. “By the time we did this year’s survey a lot of the illusions had fallen away that we would see a sustained rebound in economic growth (post-COVID).”
Tensions between major world powers remained a concern for many companies, with U.S.-China tensions cited as a top business challenge by 60% of the survey’s 325 respondents, equal to the number who pointed to China’s economic slowdown as a significant challenge.
Unease about the transparency of China’s regulatory environment also rose, with one third reporting that policies and regulations towards foreign companies had worsened in the past year, although many respondents pointed to U.S. government policy rather than China’s when asked about pressure to decouple.
The European Union Chamber of Commerce’s European Business in China position paper, released later on Tuesday, outlined how European companies are already struggling with competing requests from Chinese and Western customers to produce goods containing no Chinese or U.S.-made components or software.
Companies have been at the centre of deteriorating relations between the two countries for several years. China has criticised U.S. efforts to block China’s access to advanced technology and U.S. firms have expressed concern about fines, raids and other actions that make doing business in China risky.
Last month, U.S. Commerce Secretary Gina Raimondo said during a visit to China that U.S. companies have complained to her that China has become “uninvestible”.
Rising political and trade tensions were also cited as the top risk to China’s future economic growth in the AmCham report, with improved U.S.-China relations the number one factor respondents said would improve their industry’s prospects in China.
AmCham’s Stein said that the survey had been conducted prior to Raimondo’s visit and, since then, he believed companies had begun to reconsider whether they had been “too pessimistic that there wasn’t any way to get out of a constant downward slide (in U.S.-China relations)”.
A larger percentage of firms – 40%, up from 34% last year – are currently redirecting or looking to redirect investment that had been earmarked for China, mainly to Southeast Asia.
This echoed a report published by Rhodium Group last week, which said that India, Mexico, Vietnam and Malaysia were receiving the vast majority of investment U.S. and European firms were shifting away from China.
Reporting by Casey Hall; Additional reporting by Joe Cash; Editing by Alex Richardson and Louise Heavens
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