Biz optimism on US-China back to Trump era, says AmCham poll

BEIJING — American companies in China no longer expect relations between the two countries to improve as a result of Trump administration tensions, according to a survey by business associations.

Business optimism rose after President Joe Biden was elected in late 2020, with 45% of respondents expecting better US-China relations, according to the American Chamber of Commerce’s annual membership survey in China.

That optimism has plummeted to 27% of respondents in the most recent poll — conducted in fall 2021 — just as it was when Donald Trump was president and enacted tougher policies toward China. Rising tensions between the US and China have been among the top five challenges for doing business in China since 2019, the survey said.

“There was perhaps a degree of hope and optimism when Biden took office that the relationship would improve,” Alan Beebe, president of AmCham China, said in a call with reporters on Tuesday.

“But I think what we’ve seen over the course of the last year is that a new reality has arrived where, by and large, many of the policies and sentiments of the Trump administration remain with the Biden administration,” he said called.

Since Biden took office in early 2021, Trump-era tariffs have remained in place while the US has blacklisted more Chinese companies, preventing them from buying from American suppliers.

Trump used sanctions and tariffs to pressure China to deal with long-standing grievances about intellectual property theft, unequal market access and forced transfers of critical technology.

While China’s central government has announced measures to address many of these concerns, AmCham said local implementation remains patchy.

The past year of regulatory crackdowns and new privacy laws have added challenges for American companies doing business in China and caution about future investments, the survey found.

Economists said last month that the worst of the crackdown is likely over as Beijing focuses more on growth, but they note it doesn’t mean the end or reversal of regulation.

China’s economic slowdown is also affecting business operations in the country, while Covid-19 travel restrictions discourage new foreign talent from joining local teams.

The proportion of companies expecting earnings to grow year over year rose from 54% in 2020 to 59% in 2021, but well below the 73% recorded in 2017 before the pandemic and the US-China trade war , said AmCham.

Beebe said one reason for the ongoing earnings pressure is that companies are unable to pass on rising production costs while remaining locally competitive.

The political pressure is increasing

US companies in China are feeling increasingly less welcome and are facing mounting political pressure from Beijing, Washington and the media in both countries, the survey found.

More than 40% of respondents said they were pressured to make or avoid making statements about politically sensitive issues, particularly at consumer companies, the report said.

Geopolitical tensions have become local business risks for many international companies.

Overseas brands like Nike and H&M faced backlash on Chinese social media last year over comments on reports of forced labor in western China’s Xinjiang. More recently, US and European companies severed ties with Russia after the Ukraine war began, while Chinese tech companies doing business in Russia have remained silent.

It’s too early for American companies in China to say what the impact of US sanctions on Russia might be, except for companies that export to Russia, Beebe said.

The investment plans remain in place

The proportion of respondents planning to increase business investment in China remained steady at about two-thirds from last year, according to the survey. The proportion of respondents not considering relocating manufacturing or sourcing also remained stable at 83%, the same level since 2019.

Respondents to the AmCham survey remained optimistic about China’s market opportunities, not only for the consumer market but also for commodities and industry.

Aerospace, oil & gas and energy were industries where well over two-thirds of respondents said the quality of China’s investment environment is improving.

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But a larger proportion of companies were planning smaller-scale investments this year, while 18% said US-China tensions could delay or reverse investment decisions in China. Far fewer companies were convinced by Beijing’s commitment to further open the local market to foreign investment over the next three years.

Foreign companies increased total investment in China by 14.9% year on year to 1.1 trillion yuan ($171.88 billion) last year, according to China’s Ministry of Commerce.

Investors from Singapore and Germany increased their investments by 29.7% and 16.4%, respectively, the ministry said in January, without disclosing figures for other countries.

U.S. investment in China accounted for nearly 20% of foreign direct investment in the country in the years leading up to the pandemic, according to data from the National Bureau of Statistics, which can be accessed via Wind. Biz optimism on US-China back to Trump era, says AmCham poll

Jane Marczewski

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