SHANGHAI: US firms in China are reporting “record-low” optimism and increasingly looking to move investment away from the country, a business group said on Tuesday, as slowing growth and geopolitical tensions hurt investor confidence.
The findings by the American Chamber of Commerce (AmCham) Shanghai come as the government enacts a series of measures to prop up the sluggish economy.
There was a burst of consumer exuberance after China lifted its strict zero-Covid policies late last year. But weak consumption, a crisis in the massive property sector and soft demand for China’s exports has complicated the recovery.
“2023 was supposed to be the year investor confidence and optimism bounced back after years of Covid disruptions and restrictions,” AmCham said in a report released on Tuesday.
“According to our 2023 survey of US businesses in China, however, the rebound has not materialized and business sentiment has continued to deteriorate,” it added.
Tensions between Beijing and Washington are also weighing heavily on US businesses in China, AmCham Shanghai said.
Respondents’ optimism about the next five years was the lowest ever recorded in the survey, the report said, with just 52 percent saying they had an optimistic outlook, down 3 percentage points from the year before.
Last year, those surveyed expected a post-Covid rebound but by the time the survey was conducted this June, “a lot of the illusions had sort of fallen away, where we thought there was going to be a real sustained rebound,” AmCham Chairman Sean Stein said at a press conference on Monday.
Asked to pick the top three challenges to their company, 60 percent of the 325 businesses who responded to the survey chose US-China relations, while the same amount pointed to the economic slowdown.
Four out of 10 were planning or already in the process of redirecting their investment away from China to other countries, up 6 percentage points from last year, with Southeast Asia the top alternative destination.
AmCham said two-thirds of respondents under pressure to decouple from the Chinese market had pointed to US policy as the largest push factor, rather than Beijing’s.
Despite rising uncertainty, there have been positive moves from both the Chinese and US governments in recent months, AmCham said.
“Increasing communications between Washington and Beijing in recent months was an important step to stabilize the relationship,” Stein and AmCham President Eric Zheng said in a statement.
A series of visits by senior US officials to China this summer, including US Commerce Secretary Gina Raimondo, as well as the release last month of the Chinese State Council’s 24 measures to promote foreign investment, have all been positive signals, AmCham said.