Fewer American Companies See China as an Investment Priority, Wall Street Journal, Mar. 1, 2023.
By Dan Strumpf
Survey by American business group says top challenges for 2023 include U.S.-China tensions and regulatory hurdles
Fewer U.S. companies consider China a top investment destination following disruptions caused by Beijing’s harsh anti-Covid measures and rising geopolitical tensions, according to an annual survey by a major American business group.
U.S. companies are also more pessimistic about their financial outlook there, with more than half saying they didn’t turn a profit last year and more than a third saying their China revenue fell from a year earlier, according to the survey conducted by the American Chamber of Commerce in China.
Top business challenges identified for 2023 included rising U.S.-China tensions, China’s Covid-19 measures and what respondents said were inconsistent regulatory interpretations, as well as unclear laws and enforcement by authorities.
Chinese leaders have sought to assure investors that the country welcomes foreign investment following the end of most Covid restrictions earlier this year. The results of the survey indicate that businesses remain cautious.
The business chamber surveyed 319 of its members, primarily U.S.-based companies, between Oct. 19 and Nov. 16. The chamber also conducted follow-up interviews with respondents in February after the lifting of China’s Covid restrictions. It said it found little sign that sentiment had shifted.
The survey reveals the damage to business confidence for foreign companies operating in China in the wake of the mass lockdowns, quarantines and closed borders that marked the country’s zero-Covid era.
It found that 45% of respondents said China was either the priority or a top-three priority in their near-term global investment plans, down from 59% in 2019.
“Companies are just exhausted after three years of Covid-zero,” said Michael Hart, president of the Beijing-based chamber. “Even though Covid-zero did finally just end, think of what U.S. executives have been through the last three years.”
Despite worsening tensions, a majority of respondents in the chamber’s survey said they were planning to stay in China given the deep roots and length of stay in the country already for many.
In recent months, a clutch of big American companies have announced plans to scale up their China investments as the country has wound down its zero-Covid measures. A large number of them are consumer-facing companies who still view China’s huge market as a promising long-term bet.
At the same time, more corporate leaders have expressed plans to visit China in the coming months now that the country has reopened, with many looking to attend big government-backed business conferences like the China Development Forum and the Boao Forum for Asia.
Nearly half of the respondents in the survey said China’s investment environment was deteriorating, a 31 percentage-point jump from the previous year’s survey.
The survey showed an uptick in members considering relocating their China-based supply chains to other countries. Some companies with big supply chains in China, including Apple Inc., are moving to diversify where they source and make their products as relations between the U.S. and China have deteriorated.
China recently imposed sanctions on two U.S. companies, Lockheed Martin Corp. and a weapons-making unit of Raytheon Technologies Corp., citing the companies’ arms sales to Taiwan. The sanctions were largely symbolic as American defense companies are broadly barred from selling weapons to China.
American companies are also facing greater scrutiny at home over their dealings in China as the geopolitical rivalry between the two nations has deepened and Washington has moved to limit the activities of some business sectors there.
On Tuesday, The Wall Street Journal reported that the Biden administration was considering revoking export licenses issued to U.S. suppliers for sales to sanctioned Chinese telecom company Huawei Technologies Co., citing people familiar with the matter.