1 in 4 US firms moving some operations out of China as conditions worsen: Survey

Foreign investment has been a key part of China's transformation in recent decades but growth is now slowing.
Foreign investment has been a key part of China's transformation in recent decades but growth is now slowing.PHOTO: REUTERS

BEIJING (AFP) - One out of four US companies active in China has moved some operations out of the country or is planning to, as conditions worsen in the world's second-largest economy, an American business group said on Wednesday (Jan 20).

Foreign investment has been a key part of China's transformation in recent decades, which has seen it become the workshop of the world and its largest trader in goods, but growth is now slowing.

It faces rising competition from rivals in Asia and elsewhere on labour costs, while the American Chamber of Commerce in China said more than three-quarters of respondents to its annual business climate survey - 77 per cent - said they felt "less welcome" in the country last year.

It was a significant jump on the 47 per cent in 2014, and came in the wake of wide-ranging monopoly probes that have targeted foreign firms, some of which have paid huge penalties to Chinese authorities.

"Some of the policies which are being considered or have already been enacted are fundamentally leading China in the wrong direction," said Mr Lester Ross, the chamber's vice-chairman.

Among the 25 per cent who have moved some of their capacity elsewhere in the last three years, or are planning to do so, the most common driver was rising labour costs.

But the chamber said almost one in 10 said they were doing so because of  "regulatory challenges".

Almost half those switching - 49 per cent - moved their operations to other developing Asian countries, while 38 per cent went to North America.

US firms sometimes face controversy in their home country over operations in China, with accusations that they are exporting jobs, and some have moved capacity back in recent years, drawn in part by cost savings due to an energy boom and stable wages.

China's GDP grew 6.9 per cent last year, its slowest in a quarter of a century, government figures show, and the economy faces challenges including industrial overcapacity and a stagnant property sector, as well as stock market volatility.

Among survey respondents, 45 per cent reported flat or declining revenues last year, with only 64 per cent saying their China businesses were profitable - the lowest proportion in five years.

The chamber's 18th annual survey had responses from 496 of its 961 company members.