SHANGHAI – U.S. companies in China are reporting a “record low” optimism and are increasingly looking to shift investment away from the country, a business group said Tuesday, as slowing growth and geopolitical tensions hurt investor confidence.
The findings from the American Chamber of Commerce (AmCham) in Shanghai come as the government enacts a series of measures to shore up the sluggish economy.
There was a burst of consumer exuberance after China lifted its strict zero Covid-19 policies at the end of last year. But weak consumption, a crisis in the huge real estate sector and weak demand for China’s exports have complicated the recovery.
“2023 was supposed to be the year when investor confidence and optimism would recover after years of Covid-19 disruptions and restrictions,” AmCham said in a report published on Tuesday.
“However, according to our 2023 survey of US companies in China, the rebound has not materialized and business sentiment has continued to deteriorate,” he added.
Tensions between Beijing and Washington are also weighing heavily on American companies in China, AmCham Shanghai said.
Respondents’ optimism about the next five years was the lowest ever recorded in the survey, the report said, with only 52 percent saying they had an optimistic outlook, down three percentage points from the previous year.
Last year, respondents expected a post-Covid-19 rebound, but when the survey was conducted in June, “many of the illusions had disappeared, when we thought there was going to be a real and sustained rebound.” AmCham President Sean Stein said at a press conference on Monday.
When asked to choose the top three challenges for their company, 60 percent of the 325 companies that responded to the survey chose US-China relations, while the same number pointed to the economic slowdown.
Four in 10 were planning or already in the process of redirecting their investments from China to other countries, up six percentage points from last year, with Southeast Asia being the top alternative destination.
AmCham said two-thirds of respondents under pressure to disengage from the Chinese market had pointed to US policy as the biggest push factor, rather than Beijing.
Despite growing uncertainty, there have been positive steps by the governments of China and the United States in recent months, AmCham said.
“The increase in communications between Washington and Beijing in recent months was an important step in stabilizing the relationship,” Stein and AmCham President Eric Zheng said in a statement.
A series of visits by senior US officials to China this summer, including US Commerce Secretary Gina Raimondo, as well as last month’s publication of the Chinese State Council’s 24 measures to promote foreign investment, have been positive signs, AmCham said. AFP