In response, China has called on the US to immediately lift all tariffs on Chinese goods and announced retaliatory measures | Photo: Shutterstock
Political tensions, slowing economic growth in China and fierce domestic competition are undermining U.S. businesses’ confidence in the country, with optimism about the outlook for the next five years falling to a historic low, a survey shows.
Only 47 percent of U.S. companies are optimistic about the prospects for their Chinese operations over the next five years, a decline of five percentage points from last year, according to a survey released Thursday by the American Chamber of Commerce in Shanghai.
This was the lowest level of optimism since the introduction of the AmCham Shanghai Annual China Business Report in 1999. The number of companies that will be profitable in 2023 also reached a historic low of 66 percent.
According to Allan Gabor, chairman of AmCham Shanghai, the declining profitability is the result of a combination of factors.
“It’s about domestic demand, it’s about deflation and of course we cannot ignore members’ perceptions and concerns about geopolitics,” Gabor said.
“This affects investments and operational plans in China, and it also affects the way we develop business plans for the future in China.”
The 306 US companies surveyed came from a variety of sectors.
According to the US government, US foreign direct investment in China fell 14 percent to $163 billion in 2023 from the previous year.
Ministry of Foreign Affairs.
Geopolitics remains the biggest challenge for most US companies operating in China. Uncertainty over the future of the relationship between the world’s two largest economies has increased in the run-up to the US presidential election.
The U.S. is also expected to make a final decision soon on higher tariffs on Chinese-made products, which were announced earlier this year by President Joe Biden. The tariffs of 100 percent on electric vehicles, 50 percent on semiconductors and solar cells, and 25 percent on lithium-ion batteries, among others, were set to go into effect on August 1, but have been delayed twice.
In response, China has called on the US to immediately lift all tariffs on Chinese goods and announced retaliatory measures.
The bilateral relationship was cited by 66 percent of respondents as the biggest challenge and by 70 percent as the biggest challenge to China’s economic growth.
On a marginally positive note, there was a slight increase from last year – to 35 percent – in companies reporting that they believe Chinese regulations are transparent. However, there was also an increase to 60 percent in companies reporting favoritism toward local companies.
According to the AmCham report, the same percentage of US companies as last year, 40%, are currently diverting or planning to divert investments destined for China, primarily to Southeast Asia, but also to India.
The weakening sentiment among U.S. companies is consistent with a report released Wednesday by the European Union Chamber of Commerce in China, which said the challenges of doing business in the country are beginning to outweigh the benefits.
(Only the headline and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First publication: Sep 12, 2024 | 09:54 AM IST