China-based US businesses hit historic low

• 55% of 307 companies surveyed by the American Chamber of Commerce in Shanghai and PwC China are positive about the business prospects for the next five years.
• The reading is the lowest in the survey’s 23-year history.
• Only 18% listed China as the top priority for their company’s worldwide investment plans.

Optimism among U.S. businesses in China has reached historic lows, according to an annual survey released on Friday, as competitive, economic, and regulatory hurdles add to the pressures already placed by Beijing’s continuous zero-COVID policies.

55% of 307 companies questioned by the American Chamber of Commerce in Shanghai and the consulting firm PwC China identified themselves as positive about the business prospects for the next five years. The reading is the lowest in the survey’s 23-year history and is worse than in 2020 when COVID-19 was first detected, and in 2019, amid the trade dispute between Beijing and Washington.

In addition, about half of the firms reported a decline in their headquarters’ confidence in China’s economic management during the past year, and only 18% listed China as the top priority for their company’s worldwide investment plans, down from 27% the year before.

The respondents surveyed between July 14 and August 18 listed domestic rivalry as their greatest obstacle over the next five years, followed by U.S.-Chinese tensions, economic downturn, and travel restrictions and lockdowns due to Covid.

“What keeps a lot of businesses up at night is competition and rising competition from Chinese competitors,” chamber chairman Sean Stein told a news conference.

In the past, major competitors may have been state-backed Chinese companies, but private digital enterprises now dominate the local market.

Beijing is encouraging its core industries to become more self-sufficient, especially as tensions with the United States increase over China’s policy towards Taiwan, its ties with Russia, and, most recently, U.S. efforts to prohibit the transfer of semiconductor technology to Chinese firms.

In addition, while many nations have loosened restrictions on coronavirus, China has continued to combat its spread with lockdowns, mass testing, and quarantines, which has had a negative impact on economic growth and created considerable business disruptions.

Stein stated that easing Covid laws would “absolutely” enhance optimism, as travel restrictions have “thinned the pipeline” of projects that abroad executives could oversee in person, but cautioned that this would not be sufficient to restore mood to its previous highs.

Nevertheless, the survey revealed that only 53 firms, or 17%, indicated that they were considering leaving China in the next one to three years. Despite the challenges, the vast size of the market, the availability of skilled talent, and the robustness of the supply chain made most businesses committed to China.

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