US businesses still 'hesitant' with China

Although confidence in China's short-term economic outlook has improved, the latest survey results still show that US businesses are reluctant to expand investment in the country amid bilateral tensions and legal challenges.

According to a survey by the American Chamber of Commerce (AmCham) in China released on January 2, nearly half of the surveyed American companies said they "have no plans to expand investment or are planning to cut investment" in the world's second largest economy.

Much of the data was collected last October, ahead of a meeting between US President Joe Biden and Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation summit in San Francisco.

AmCham said that in addition to the uncertain policy environment that is a concern in 2023, nearly a third of the 343 businesses surveyed said that uncertainties in the US-China economic relationship were the main reason for them to cut their investment plans in 2024, especially in the technology and research and development sectors.

“Although bilateral trade has expanded in recent years, distrust between the US and China remains high and relations remain tense,” said AmCham China Chairman Sean Stein.

Uncertainties in bilateral economic relations make American businesses hesitant to invest in China. (Photo: AP)

The Chinese market remains important to US businesses, with half of respondents naming it as their top global investment destination. At the same time, 77% of businesses across all sectors are not considering moving manufacturing or sourcing operations outside of China.

In addition to the main concern about uncertainty in US-China economic relations, the survey also pointed out a number of other issues of concern for US businesses in China, including risk management and uncertainties about the policy environment, trade tensions or market access barriers.

The US and China have stepped up cooperation since last year, with meetings of the two sides’ financial and economic working groups, which were established in September 2023 after a visit to Beijing by US Treasury Secretary Janet Yellen, with the aim of promoting regular communication.

However, the US-China trade outlook continues to be clouded by calls for decoupling, a tech war and export controls, with 57% of companies surveyed still lacking confidence that China will continue to open its market to foreign businesses.

Sentiment on the ground is also mixed, with 39% of companies feeling less welcome in China, expressing concerns about market openness and unfair treatment.

Meanwhile, 31% of companies said they felt more welcome, up 13% from 2022. This is a positive sign, but not enough to completely dispel lingering concerns.

Businesses hope the two governments can cool down and pursue productive, high-level dialogue, while calling on the Chinese government to treat US businesses fairly and enhance more effective cooperation with the foreign business community.

Hua Yu (Source: SCMP)

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