US firms don’t see China as top 3 investment priority for first time in AmCham survey’s history

SHANGHAI - US companies in China turned much more pessimistic over the past year, with ever-worsening relations between Washington and Beijing prompting rising numbers to reconsider their position in the country, according to a survey released on Wednesday by the American Chamber of Commerce (AmCham) in China.

For the first time in the 25-year history of AmCham China’s business sentiment survey, a majority of responding companies said the country is no longer seen as a “top three investment priority”.

“While US-China trade has continued to grow throughout the pandemic, bilateral relations have become increasingly complex,” AmCham chairman Colm Rafferty said.

“Last year was particularly challenging,” he added, highlighting “efforts to ensure compliance with various new US and China-related regulations”.

American lawmakers have been intensifying efforts to find ways to decouple the United States from China, reflecting a growing desire to counter Beijing’s global influence as the world’s largest economies spar over issues from Taiwan to technology to surveillance.

The pessimism about the future was reflected in where executives are planning to invest their money. Almost half of the companies are not planning for new investment in China, with another 9 per cent planning to cut investment.

While many companies said they have no plans to shift their supply chains from China, 12 per cent are already moving manufacturing or sourcing outside of the country and another 12 per cent are considering it – the two readings almost double the level of even a year earlier.

The rise in tensions between the US and China was the most important business challenge – especially in the technology, research and development sectors – due to the continued conflict over semiconductors, respondents said.

The companies’ outlook in China was also more negative than in previous years, with a third of respondents pessimistic about the domestic market and the prospects for economic recovery.

About 46 per cent think US-China ties will continue to worsen in 2023, up from 24 per cent the previous year, the survey showed.

Over half of the 319 firms that responded to the survey, conducted between mid-October and mid-November 2022, said they would not be profitable in 2022, with 22 per cent forecasting a loss, the worst result since at least 2019.

Two-thirds blamed repeated lockdowns and other zero-Covid restrictions, the survey showed.

Overall inbound foreign investment in China dropped sharply in the second half of 2022 as the increasingly strict lockdowns dragged on economic growth.

Beijing is concerned about the outcome and has announced that getting foreign companies to stay and attracting new investment would be a focus for 2023.

Since the AmCham survey was conducted, China has abandoned its zero-Covid policy, which might improve the outlook for both American and Chinese businesses.

Parts of the economy appear to be rebounding, although the housing market has remained weak and export demand is dropping, knocking away two pillars of growth in previous years.

However, relations with Washington have continued to spiral downwards, with a Chinese balloon that floated over the US and was then shot down by the American military the latest flashpoint between the two nations. REUTERS, bloomberg