(MENAFN- Asia Times) More than a quarter of American firms are reprioritizing other countries over China as sentiment regarding Sino-US relations grows more pessimistic, says the American Chamber of Commerce in China (AmCham China).
About 27% of surveyed AmCham China members are considering countries other than China when making their investment decisions, mainly due to concerns about an uncertain policy environment in China, according to a survey conducted between April 18 and 20 and published in the 2023 american business in china white paper on Wednesday.
The figure was only 6% in a previous survey, which was conducted last November and published in the 2023 china business climate survey report (BCS) last month.
In the latest survey, about 87% of US firms expressed pessimism regarding the outlook for the relationship between the world's two largest economies. The figure was 73% in the 2023 BCS report.
The proportion of respondents who are optimistic about Sino-US relations fell from 8% to 2% for the same period. The remaining 11% are neutral on the matter.
Colm Rafferty, Chairman of AmCham China, said the latest survey was conducted against a backdrop of a tense US-China bilateral relationship that continues to stoke uncertainty in business decision-making while China is no longer the primary investment destination it once was.
Rafferty said members reported a slightly more pessimistic financial outlook for 2023 compared with previous years.
In the White Paper, AmCham China says the refusal of China to speak out against Russia's 2022 invasion of Ukraine has further exacerbated tensions with the US and other Western nations as well as several of its neighbors.
“The Chinese government has repeated Russian propaganda and disinformation about the war, opposed economic sanctions against Russia and abstained or sided with Russia in United Nations votes on the war in Ukraine,” it says.“These decisions have continually put China at odds with many the US and many Western nations, who have threatened sanctions should China offer military or financial aid to Russia.”
It says that without peaceful resolution, Beijing's stance in the Ukrainian war will continue to raise concern among foreign companies invested in China.
US imports from Mexico, Vietnam, India and other“friend-shoring” venues depend on imports of Chinese components, according to an Asia Times study of international trade data.
James Crabtree, executive director of the Asia branch of the International Institute for Strategic Studies, says in a tweet that, because the West's supply chains around the world will still need Chinese components, their fundamental vulnerability will remain.
Crabtree also says an economic decoupling between the West and China will leave Southeast Asian countries more economically dependent upon China.
Top business challenge Sino-US political tensions increased after a Chinese“spy balloon” was seen in North American airspace in late January. The situation was worsened by the cancellation of US State Secretary Antony Blinken's China trip, new sanctions against Chinese firms and a historic meeting between Taiwanese President Tsai Ing-wen and US House Speaker Kevin McCarthy in California on April 5.
AmCham China says rising tensions between the two powers remain a top business challenge cited by its members. It says three-quarters of companies are being directly impacted by the changing US-China relationship while 46% of members expect the relationship to deteriorate in 2023, up from 24% in 2022.
Besides, it says, 38% of member companies felt that foreign companies were treated unfairly as compared with domestic companies in China last year, compared with 33% that felt that way in 2021. These companies said regulatory enforcement topped the list of unfair treatment areas, with licensing and market access and government financial support/subsidies sharing second place.
Made in China. Cardboard boxes with text made in China and Chinese flag on a roller conveyor. Photo: 3d illustration
“Almost half of our members felt 'less welcome' in China, with greater than one-third of survey participants expressing unfair treatment towards foreign companies by government policies and subsequent enforcement actions,” it says.“Unfortunately, this has also led to the second year of an increase in uncertainty among our members regarding the Chinese government's intentions to open up China's market to foreign investment.”
According to the 2023 BCS report, 24% of respondents said last November that they were considering or already relocating or already relocating their manufacturing or sourcing outside of China while 74% said they were not considering it. After the Chinese government ended its zero-Covid policy in December, there were still 23% of respondents acknowledging in mid-April that they planned to leave China.
The 2022 bcs report said in March last year that only 14% of members wanted to leave China while 83% said they would stay. The Chinese Foreign Ministry's spokesperson at the time, Zhao Lijian, said foreign investors had cast a vote of confidence in China's development.
When the 2023 BCS report was released last month, the foreign ministry did not comment on it but waited to comment on the separate survey conducted by AmCham South China. The survey said more than 90% of the participating companies selected China as one of the most important investment destinations and 75% of the companies planned to reinvest in China in 2023
“China remains a popular destination for foreign investment because it has a huge market and full-fledged industrial and supply chain networks,” Mao Ning, a foreign ministry spokesperson, said on March 1.“No matter how the international landscape may change, we will not waver in our resolve to further open up at a high standard and our determination to share development opportunities with the rest of the world.”
China's foreign direct investment (FDI) rose 4.9% to 408.45 billion yuan (US$59.2 billion) in the first quarter from a year ago, the Ministry of Commerce said on April 20. If denominated in US dollars, the year-on-year growth of the country's FDI was only 0.5% in the first quarter, significantly down from 32% in the same period of last year.
US investment curbs Next week, United States President Joe Biden will sign an executive order that will restrict US companies and funds from investing in China's microchips, artificial intelligence, quantum computing, biotechnology and clean energy projects and firms.
The investment curbs will require US companies to notify the government of new investments in China's high-technology sectors and prohibit some of these deals. Biden will try to announce them before the G7 Summit on May 19-21 and ask US allies for support.
AmCham China says several US export control rules are not effective as many items that require US dual-use export licenses may be exported readily from non-US countries without licenses.
“The US government should work with other governments to impose multilateral controls, instead of imposing unilateral US controls that are ineffective in achieving national security and foreign policy goals,” the chamber says.“Where controls remain unilateral, it should reconsider the effectiveness of such controls, and remove those controls that do not meet US policy goals.”
AmCham suggests that government and industry representatives from both countries can establish a vehicle to openly collaborate to address export control concerns and determine baselines that would enhance the ability of Chinese companies to procure US-controlled commodities and allow US and Chinese companies to develop technology together for the benefit of both countries.
read: us investment curbs on tech firms infuriate china
Follow Jeff Pao on Twitter at
@jeffpao3
Like this:Like Loading...