China Is Still Long-Term Priority for US Firms, AmCham Says
Zhang Yushuo
DATE:  Mar 10 2020
/ SOURCE:  yicai
China Is Still Long-Term Priority for US Firms, AmCham Says China Is Still Long-Term Priority for US Firms, AmCham Says

(Yicai Global) March 10 -- China remains a top long-term priority for most US companies despite weakening earnings and growing pessimism about their market growth and China investment plans, according to a report published by the American Chamber of Commerce in China today.

The China Business Climate Survey Report, conducted in late 2019, showed that just 61 percent of members described themselves as 'profitable' last year, down from 73 percent in 2017. This is the lowest proportion of US firms to say they are making money in China in almost two decades.

Against a backdrop of slowing economic growth and wider complications caused by US-China trade tensions, a growing number of companies expressed a pessimistic outlook, according to the report, which is now in its 22nd year. Nearly a quarter of companies, and over 40 percent in the resources and industrial sector, do not expect their markets to grow this year.

Twenty-one percent of the 372 firms surveyed saw a drop in revenue in 2019, compared with 7 percent in 2017. However, 14 percent of respondents are optimistic about 2020, up from 11 percent the year before.

"Foreign businesses will have to be versatile and resilient and keep long-term plans in mind," said AmCham Chairman Greg Gilligan. "But the market panic of Covid-19 will eventually subside, and 2020 will be a critical year for businesses and policy makers with significant impact on the trajectory of US-China relations."

Better Investment Environment

Reforms in China's financial services sector have boosted members' confidence in the government's commitment to further open its market to foreign investment.

Half of the surveyed companies said that the investment environment in China has improved in 2019, compared with 38 percent in 2018. Enterprises in the aviation, medical services and retail sectors were the most upbeat.

However, some 37 percent of members, the largest proportion since 2013, said they are delaying additional investments this year, or are even looking to scale back their investment footprint.

Almost 70 percent of respondents said that China's enforcement of intellectual property rights has improved in the last five years, up 10 percentage points from 2018.

IP protection is key to ensuring further investment in China, many members said. To invest, they would want the Chinese government to increase the transparency, predictability and fairness of the regulatory environment, ensure greater IP protection and limit the use of industrial policies that tilt the playing field in favor of domestic players, especially state-owned enterprises.

Some 63 percent of members, however, believed that foreign companies in their industry are treated equally or preferentially in comparison with local companies.

Opportunities Galore

Firms in the consumer and services sectors remained optimistic as they anticipate growth in the number of middle-income households. Half of the enterprises in the service sector believed that the increased globalization of Chinese companies and growing outbound investment will bring opportunities.

Companies in the resources and industrial sectors saw growth in urbanization and continued support for infrastructure investment. Technological firms and those involved in research and development placed importance on expanding their business.

Nearly one-fifth of respondents have moved, or are considering moving, their business outside of China, a proportion which has slowly decreased over the past three years.

Covid-19 Impact

The survey was conducted before the Covid-19 outbreak struck. However, a recent AmCham flash survey found that 55 percent of canvassed US firms felt it was too early to say how the epidemic would affect their three-to-five-year business plans. Thirty-four percent thought there would be no impact.

Early communications indicate that, despite a likely hit on their performance by the virus, member companies remain confident in the Chinese market, according to a previous report.

Editor: Kim Taylor

Follow Yicai Global on
Keywords:   China Business Climate Survey Report,AmCham China,Covid-19