A recent survey highlights that U.S. businesses operating in China have become increasingly pessimistic about their future prospects in the country, primarily due to geopolitical tensions and
a decelerating economy. The annual survey, released on Tuesday by the American Chamber of Commerce (AmCham) in Shanghai, revealed that optimism among surveyed U.S. firms about their five-year outlook in China has dropped to an all-time low, even after the easing of COVID-related restrictions that had weighed on both revenue and sentiment throughout 2022.
According to the survey, only 52% of U.S. firms expressed optimism about their five-year business outlook in China, marking the lowest level of optimism recorded since the inception of the AmCham Shanghai Annual China Business Report in 1999.
Sean Stein, Chairman of AmCham Shanghai, expressed his surprise at this year's survey results, stating, "Frankly, if there was one thing that surprised me about the survey this year, it was that number. By the time we conducted this year's survey, many had dispelled the notion of a sustained economic growth rebound post-COVID."
Geopolitical concerns continued to dominate the minds of many firms, with 60% of the 325 survey respondents identifying U.S.-China tensions as a top business challenge. This figure equaled the percentage of respondents who cited China's economic slowdown as a major concern.
Additionally, apprehension regarding the transparency of China's regulatory environment increased, as one-third of respondents reported a worsening of policies and regulations towards foreign companies in the past year. It is worth noting that many respondents attributed this pressure to U.S. government policies rather than China's own initiatives when discussing the notion of decoupling.
The strained relationship between the two nations has placed companies at the center of deteriorating bilateral relations. China has criticized U.S. efforts to restrict its access to advanced technology, while U.S. firms have expressed anxiety over fines, raids, and other actions that have made doing business in China increasingly risky.
Just last month, U.S. Commerce Secretary Gina Raimondo, during her visit to China, revealed that U.S. companies had complained about China becoming "uninvestible."
Geopolitical tensions were also identified as the primary risk to China's future economic growth in the AmCham report. Respondents indicated that improved U.S.-China relations would be the most influential factor in enhancing their industry's prospects in China.
It's important to note that the survey was conducted before Raimondo's visit, and since then, companies have begun to reevaluate whether they were overly pessimistic about the possibility of reversing the constant downward slide in U.S.-China relations.
Moreover, a larger percentage of firms, now at 40% (up from 34% last year), are redirecting or considering redirecting investments initially earmarked for China, primarily to Southeast Asia.
These findings mirror a recent report by Rhodium Group, which indicated that India, Mexico, Vietnam, and Malaysia were the primary recipients of investments being shifted away from China by U.S. and European firms. Photo by N509FZ, Wikimedia commons.