Optimism among American companies in China about business prospects in the country for the coming years has fallen to an all-time low.
An annual survey conducted by the American Chamber of Commerce (AmCham) in Shanghaiwhich was published on Tuesday, found that geopolitics and a slowing economy have eroded confidence and fueled pessimism.
Even after the end of Covid restrictions, which weighed heavily on both revenue and confidence in 2022, the percentage of US companies surveyed optimistic about China’s five-year trade prospects fell to 52%.
This was the lowest level reported since AmCham Shanghai’s Annual China Business Report was first presented in 1999.
“Frankly, if there was one thing that surprised me about this year’s survey it was that number,” said AmCham Shanghai president Sean Stein.
“When we did this year’s survey, many of the illusions that we would see a sustained rebound in economic growth (post-Covid) had faded.”
Geopolitics cited as main challenge
Geopolitics remained a major concern for many companies, with 60% of the 325 respondents citing tensions between the United States and China as a top business challenge, equal to the number that noted China’s economic slowdown as a top challenge.
Concern also grew over the transparency of China’s regulatory environment, with one-third reporting that policies and regulations toward foreign companies had worsened in the past year, although many respondents pointed to U.S. government policy rather than China’s. when asked about the pressure to uncouple.
The companies have been at the center of deteriorating relations between the two countries for several years. China has criticized US efforts to block China’s access to advanced technology and American companies have expressed concern about fines, raids and other actions that make doing business in China risky.
Last month, U.S. Commerce Secretary Gina Raimondo said during a visit to China that U.S. companies have complained to her that China has become “uninvestable”.
Investment is redirected towards Southeast Asia
Geopolitical tensions were also cited as the top risk to China’s future economic growth in the AmCham report, with improving US-China relations being the number one factor respondents said would improve their industry’s prospects. in China.
AmCham’s Stein said the survey had been conducted before Raimondo’s visit and since then he believed companies had begun to reconsider whether they had been “too pessimistic that there was no way out of a steady decline.” (in the US. -Relations with China)”.
A higher percentage of companies, 40%, compared to 34% last year, are currently redirecting or seeking to redirect investments that had been destined for China, mainly to Southeast Asia.
This echoed a report released by Rhodium Group last week, which said India, Mexico, Vietnam and Malaysia were receiving the vast majority of investments that US and European companies were shifting away from China.
- Reuters with additional editing by Jim Pollard