American businesses in China see gloomy year ahead

Published Tue, Feb 26, 2019 · 02:49 AM

[BEIJING] US companies in China forecast a gloomy year ahead, with many worrying about a deterioration in bilateral trade ties and nearly a quarter delaying investments, a business survey showed Tuesday.

The survey of 314 US businesses by the American Chamber of Commerce in China provided a full accounting of challenges American business face after Beijing and Washington exchanged tit-for-tat tariffs on more than US$300 billion in two-way trade.

The report was released two days after US President Donald Trump said he would delay a planned further hike in tariffs on Chinese goods this week after he and Beijing both hailed "substantial progress" in trade negotiations.

The survey found that 89 per cent of businesses reported a pessimistic view on the world's most important bilateral trade relationship.

The tariffs directly hit US businesses, increasing costs and lowering demand from Chinese consumers with some companies even forced to lay off workers, the survey showed.

The US-China trade spat was among the top concerns for businesses across sectors. Three-fourths expect the relationship to further deteriorate or remain the same this year.

Nearly two-thirds said the tensions affected their plans for the market, and caused nearly a quarter to delay further investment in China, the survey showed.

The trade tensions have upped inspections, slowed customs clearance and increased regulatory scrutiny for many firms, the chamber said.

About one-fifth of firms have moved or are considering moving production outside of China, with the tariffs and rising costs top reasons, according to the survey.

Market access -- a long-time concern for US, European and other foreign businesses and at the top of the Trump administration's list of gripes -- remains a problem for about three-quarters of companies.

"China has made doing our type of business, which partly involves importing agricultural products into China, more difficult every year since I have been coming to China," said one anonymous executive, according to the chamber.

Another issue under debate between the world's top two economic powers is protection of American intellectual property, with Washington accusing Beijing of encouraging theft of US creations.

One-third of firms said it had caused them to limit investment in China, rising to about one-half in technology and resource and industrial sectors.

Still, 59 per cent of firms said there has been improvement in IP protection in the past five years.

"Yes, there are challenges -- many longstanding, and many past commitments remain unfulfilled," Timothy Stratford, chairman of the chamber, said in the report.

"China is still a critically important market for many American companies, and the bilateral economic relationship is too important to not get right."

Slowing growth is also a major concern after the Chinese economy posted its slowest expansion in nearly three decades in 2018.

More than half of businesses forecast market growth this year of five per cent or less -- below the about six per cent growth target Beijing is expected to announce next month.



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