US businesses not leaving Chinese market despite strained ties, says survey of companies

87 per cent of companies reported no plans to move production out of China.
87 per cent of companies reported no plans to move production out of China.PHOTO: AFP

WASHINGTON (XINHUA) - US businesses are not leaving the Chinese market despite "an unprecedented downturn" in US-China relations during the Covid-19 pandemic, according to an annual member survey released on Tuesday (Aug 11) by the US-China Business Council.

"Both our data as well as conversations with member companies indicate that American companies remain committed to the China market over the long term," said the survey.

The US-China Business Council is a trade group representing more than 200 US companies that do business with China.

Up to 83 per cent of companies counted China as either the top or among the top five priorities for their company's global strategy, according to the survey, which was conducted in late May and June among more than 100 companies that are members of the US-China Business Council.

Projections about the five-year business outlook in China are similarly sanguine, with nearly 70 per cent saying that they are optimistic about the commercial prospects of the market, according to the survey.

In addition, 91 per cent of companies polled indicate that their China operations are profitable, albeit at a lower margin than in years past, the survey showed, noting that the primary restraint on profitability is Covid-19 and its impact on the economy.

As a result of this long-term confidence in the Chinese market, 87 per cent of companies reported no plans to move production out of China, the survey noted, adding that some companies are seeking potential new investment.

One quarter of the US-China Business Council member companies, however, reduced or stopped planned investment in China in the last year, the survey showed. The top reasons were increased costs, uncertainties from US-China trade tensions, and uncertainty stemming from Covid-19.

The annual survey also noted that the US-China relationship poses the top challenge for US companies in China for the third consecutive year, as 86 per cent of US-China Business Council members report that bilateral trade tensions have impacted their business with China.

 
 
 

"US-China trade and investment supports about 2.6 million American jobs," said Council President Craig Allen. "We need to sustain and grow those jobs in future years, while finding ways to reduce conflict in other areas of the relationship."

While business uncertainty remains high across the board, the China-US phase-one economic and trade agreement provided "a modicum of confidence" in the China investment environment by "freezing additional tariff increases and stabilising the overall commercial relationship", according to the survey.

Some 88 per cent of respondents have a positive or somewhat positive view of the agreement, the survey showed.

"Companies are now seeing the fruits of the agreement, particularly the market openings," said Mr Allen. "Phase One must be a success if we are to deepen trade negotiations and work toward a Phase Two. As our survey shows us, there is more work to be done."