Geopolitical tensions and an economic slowdown are causing growing pessimism among U.S. companies operating in China, according to a survey released by the American Chamber of Commerce in Shanghai (AmCham). The survey, conducted after the COVID-19 control measures were lifted, revealed that only 52% of US companies are optimistic about their business prospects in China, the lowest level reported in the annual China Business Report. Shaun Stein, chairman of AmCham Shanghai, expressed surprise at the numbers, stating that the illusion of a sustained recovery in economic growth had been shattered. The survey also highlighted concerns about business challenges, including the transparency of China’s regulatory environment and policies and regulations for foreign companies. However, when asked about pressure to decouple, more respondents cited U.S. government policies than China.
The deterioration of U.S.-China relations in recent years has put companies at the center of the conflict. China has criticized the U.S. for blocking its access to advanced technology, while U.S. companies have expressed concerns about fines, raids, and other actions that jeopardize their operations in China. The report also mentioned that geopolitical tensions pose the greatest risk to China’s future economic growth, and improving U.S.-China relations is seen as a factor in improving industry prospects. However, since the survey was conducted, some companies have become “too pessimistic that there is no way out of the perpetual downturn [in the economy],” leading to a larger proportion of companies redirecting or planning to redirect investments from China to Southeast Asia.
In line with this trend, a report by Rhodium revealed that India, Mexico, Vietnam, and Malaysia are receiving the majority of investments as U.S. and European companies exit China. The survey highlights the challenges and uncertainties faced by U.S. companies operating in China, as well as the shifting investment patterns in the region.