US firms in China hesitant about expanding amid crackdowns: AmCham survey

Rising tensions between China and the US remain a top concern for the companies. PHOTO: REUTERS

BEIJING (BLOOMBERG) - United States businesses in China are hesitant about increasing investment due to rising regulatory uncertainties, pessimism over market access and economic growth concerns, according to a survey by the American Chamber of Commerce (AmCham).

About 40 per cent of the 353 respondents saw the regulatory environment as one of the driving factors of pessimism over doing business in China, up 16 percentage points from a year ago, according to a report released on Tuesday (March 8). More than a third said they will lower investment due to policy uncertainties.

"In terms of regulatory uncertainties, it's the technology and R&D (research & development) intensive industries that are feeling that the most," AmCham China president Alan Beebe said at a briefing on Tuesday.

China's dual circulation strategy and the call for greater self-sufficiency means it is "working to invest further in technology and having industrial policies that would put companies at a relative disadvantage over time", Mr Beebe said.

Ambiguity around the "common prosperity" goal also resulted in confusion among firms over how policies may affect them, he said.

Beijing carried out sweeping regulatory crackdown on sectors from education to Internet platforms last year, in an effort to address monopolistic practices, narrow the nation's wealth gap and make economic growth more sustainable in the long run. The slew of actions triggered a sharp sell-off in Chinese stocks last year. The campaign has taken a breather since late last year as growth concerns have mounted.

Rising tensions between China and the US remain a top concern for the companies.

The respondents' outlook on US-China relations was less rosy for this year, with 24 per cent expecting ties to deteriorate, up from 19 per cent. This could show initial optimism that followed US President Joe Biden's appointment - and hopes for an improvement in bilateral relations - has faded over time with many Trump-era policies remaining, Mr Beebe said.

More than 80 per cent of the surveyed companies said increasing the transparency, predictability and fairness of the regulatory environment would encourage more investment, while 65 per cent recommended limiting the use of industrial policies that create barriers.

Less than half of the companies surveyed were confident in the government's commitment to further open the market to foreign investment in the coming three years, down from 61 per cent in the previous year, according to the survey, which was conducted between October and November last year.

Profitability of the American firms rebounded from a year ago but still has not fully recovered to pre-pandemic levels, according to the survey. Those optimistic about domestic market growth in the next two years declined to 64 per cent, from 75 per cent a year ago.

Other highlights:

• About 42 per cent of the respondents said they planned to increase investment by 1 per cent to 10 per cent, while 29 per cent said they had no expansion plans.

• One-third of respondents said China's regulatory actions are causing concern at their global headquarters.

• Technology companies are worried about the impact of the Cybersecurity Law's implementation, and more than 80 per cent of them believe the latest data localisation requirements will impact them negatively.

• About 15 per cent of the surveyed companies plan to reduce investment if travel restrictions do not improve within the next six months.

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