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Thursday, July 25, 2024

Survey: US Companies in China No Longer See It as Primary Investment Destination 

https://ift.tt/VzDq2E1. companies no longer regard China as the primary investment destination it once was, according to an annual survey of American businesspeople operating there who, for the first time in 25 years, no longer see China as a top-three market.

Most of those surveyed by the American Chamber of Commerce in China (AmCham China) say they are pessimistic, given 2022 revenue and profits, China’s economy, the overall outlook for investment and business environment, and the future of U.S.-China relations.

According to the 2023 China Business Climate Survey, released Wednesday by the American Chamber of Commerce in China (AmCham China), only 45% of the surveyed American companies regard China as their primary or among their top three investment destinations, which is the largest drop in the survey’s 25-year history.

Michael Hart, president of AmCham China, said Wednesday at a news conference, “A year ago, 60% of people said China was either their top priority or their top-three priority. And this year, that’s fallen to 45%.”

The survey was conducted from October 16 to November 16 last year, before Beijing lifted its draconian zero-COVID policy, but AmCham China conducted a flash survey in February to monitor changes as China emerged from lockdowns and other controls.

A request for comment emailed by VOA to the Chinese Embassy in Washington was not answered in time for publication.

Factors affecting plans

Executives from 319 American multinational companies participated in the survey, accounting for about 47% of the total member companies of AmCham China. Of the respondents, 55% reported no plans to expand or decrease investment in China operations in 2023.

The factors coloring the survey results include the impact of the three-year pandemic and severe lockdown, the difficulty of business travel for Americans, the challenge of supply chain disruption, and the overall downturn in the business atmosphere, according to Hart.

Affected by the zero-COVID lockdowns, 68% of the American companies participating in the survey predicted that their company’s revenue in 2022 may be flat or lower than that in 2020. COVID was first reported in humans in late 2019 in Wuhan, China.

Hart said that in order to diversify risks, most of the member companies have begun to invest in other countries and establish alternative production lines. Their overall confidence in China has begun to decline, especially after the 20th National Congress of the Communist Party of China last year. That’s when the Chinese government discussed establishing state-controlled companies in various industries, making 65% of the American businesspeople question China’s commitment to continued foreign investment.

Of the AmCham China members surveyed, 49% said they feel less welcome than a year ago; that rises to 56% in the consumer sector.

However, when asked if they planned to withdraw from China, as many as 74% of the American companies said they would not consider relocating manufacturing or sourcing outside China, compared with 12% who had begun moving their businesses out of China, and another 12% who remained on the fence.

Warning sign

According to AmCham China’s survey, the increasing number of companies that are relocating or considering relocation is a warning sign worth watching.

Colm Rafferty, chairman of AmCham China, called on the U.S. and Chinese governments to face up to the challenges the foreign business community is encountering. He addressed a news conference Wednesday through a prerecorded video.

Rafferty said, “Last year was particularly challenging for our member companies, as they dealt with China’s economic slowdown, zero-COVID control measures, and ongoing efforts to ensure compliance with various new U.S. and China-related regulations.”

According to the survey, the increasingly tense U.S.-China relations topped the challenges facing U.S. businesspeople in China for three consecutive years, far ahead of COVID-19 prevention measures, inconsistent regulatory interpretation and unclear laws and enforcement, rising labor costs and regulatory compliance risks.

Moreover, American businesspeople are pessimistic about the future trend of U.S.-China relations. Forty-six percent of those surveyed believe that the relationship between the two countries will continue to deteriorate, and as many as 72% have felt political pressure from the governments of the two countries, asking them to violate commercial operations and occasionally make political statements.

Tensions between the U.S. and China have affected the hiring progress of U.S. companies for the first time. The survey found that 51% of members reported qualified employees are unwilling to relocate to China. This may also be related to China’s strict pandemic prevention measures.

Wang Zhangcheng, professor of human resources management at Guangzhou City University of Technology, told VOA Mandarin that the tensions in U.S.-China relations may affect the employment choices of Chinese employees, but that most workers will make employment choices without considering U.S.-China relations.

He said a small number of Chinese workers may refuse to work for foreign companies or use foreign products because they see patriotism trumping livelihood.

 

Geopolitical effects

He Jiangbing, a Chinese economist in Hubei province in central China, told VOA Mandarin that the survey results reflect geopolitics such as the war in Ukraine and tensions over Taiwan.

He said that China’s tightening control of foreign and private enterprises is not conducive to attracting investment. He predicts the pace of economic decoupling between the United States and China may accelerate in the future.

“Overall, the business environment will deteriorate in the future, and it will not improve,” he said. “I personally predict that this trend will not be reversed within five to 10 years.”

Adrianna Zhang contributed to this report.

Author webdesk@voanews.com (Joyce Huang)
Source : VOA

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