A study released on Tuesday revealed that political unrest and a faltering economy are eroding the confidence of American companies doing business in China, with the percentage of firms confident in their five-year outlook at a record low.

According to the annual poll released by the American Chamber of Commerce (AmCham) in Shanghai, even after the COVID limits were lifted, which had a significant negative impact on revenues and attitude in 2022, the percentage of surveyed U.S. enterprises confident about the five-year China business outlook decreased to 52%.

Since the AmCham Shanghai Annual China Business Report’s inception in 1999, this was the report’s most pessimistic reading.

“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).”

U.S.-China tensions were named as a top business difficulty by 60% of the survey’s 325 respondents, which is the same percentage who cited China’s economic slowdown as a key challenge. Tensions between major international powers continued to be a concern for many businesses.

When asked about pressure to decouple, many respondents pointed to U.S. government policy rather than Chinese government policy, raising concerns about the transparency of China’s regulatory environment. However, one third of respondents reported that policies and regulations towards foreign companies had worsened in the past year.

Later on, on Tuesday, the European Union Chamber of Commerce presented its position paper on European Business in China, which described how European businesses are already hampered by conflicting requests from Chinese and Western clients to make things without using Chinese or American-made hardware or software.

For many years, businesses have been at the centre of the deteriorating ties between the two nations. The United States’ attempts to deny China access to cutting-edge technology have drawn criticism from China, and American businesses have voiced concern over fines, raids, and other moves that make doing business in China difficult.

During a visit to China last month, U.S. Commerce Secretary Gina Raimondo stated that American businesses had complained to her that China had become “uninvestible”.

The AmCham report also identified rising political and trade tensions as the greatest threat to China’s future economic growth, while respondents ranked improving U.S.-China ties as the top factor that would boost the prospects of their industry in China.

The survey was taken before Raimondo’s visit, according to AmCham’s Stein, and since then, he thinks businesses have started to reevaluate 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)”

40% of businesses, up from 34% last year, are either rerouting or trying to reroute investment that was originally intended for China, primarily to Southeast Asia.

This was in line with a report released last week by Rhodium Group, which said that American and European businesses were moving away from China and towards countries like Mexico, Vietnam, Malaysia, and India for investment.

(Adapted from DavidsCourse.com)

Categories: Economy & Finance, Entrepreneurship, Geopolitics, Strategy, Uncategorized