According to a business association study, American firms in China no longer anticipate ties between the two nations to improve due to the Trump administration’s conflicts.
Following President Joe Biden’s election in late 2020, companies saw a surge in confidence, with 45 percent of respondents anticipating improved US-China ties, according to the American Chamber of Commerce in China’s annual poll of members.
This degree of optimism has fallen to 27% of respondents in the most recent survey — taken in autumn 2021 — matching the level during Donald Trump’s presidency when he imposed harder measures toward China.
According to the study, since 2019, rising US-China tensions have been identified as one of the top five barriers to conducting business in China.
“There was probably a sense of hope and optimism that the relationship would improve after Biden took office,” Alan Beebe, president of AmCham China, told reporters Tuesday during a conference call.
“However, I believe what we’ve witnessed over the last year is the emergence of a new reality, in which the majority of the Trump administration’s policies and sentiments stay in place under the Biden administration,” he added.
Since Biden’s inauguration in early 2021, Trump-era tariffs have remained in place, while the US has put other Chinese firms to blocklists prohibiting them from purchasing from American suppliers.
Trump utilized penalties and tariffs to urge China to address long-standing allegations of intellectual property theft, uneven market access, and coerced technology transfer.
While the Chinese central government has established plans to address many of these problems, AmCham noted that execution has been inconsistent locally.
The poll indicated that the previous year’s regulatory crackdown and new data privacy rules had exacerbated American firms’ difficulties operating in China and skepticism about future investments.
Economists predicted last month that the worst of the crackdown was likely over as Beijing shifted its attention to growth. Still, they cautioned that this did not guarantee the end of regulation or its reversal.
China’s economic slowdown also affects corporate operations, while Covid-19 travel restrictions prevent young, international talent from joining local companies.
AmCham said that the percentage of businesses expecting year-on-year profit growth increased to 59 percent in 2021 from 54 percent in 2020 but is considerably below the 73 percent observed in 2017 before the epidemic and the US-China trade war.
Beebe stated that earnings have been under pressure because businesses have been unable to pass on growing manufacturing costs while remaining competitive locally.
Political pressure is increasing.
The study found that businesses in the United States increasingly feel unwelcome in China and are subject to rising political pressure from Beijing, Washington, and the Chinese and American press.
According to the research, over 40% of respondents indicated that they were under pressure to make or refrain from making remarks regarding politically sensitive matters, particularly among consumer enterprises.
Geopolitical difficulties have developed into local commercial hazards for several multinational corporations.
Last year, foreign companies such as Nike and H&M received backlash on Chinese social media for remarks regarding forced labor claims in western China’s Xinjiang region.
Recently, with the outbreak of the Ukraine war, US and European corporations severed connections with Russia, while Chinese technology companies doing business in Russia stayed mute.
Beebe said it is too early to predict the impact of US sanctions on Russia on American enterprises in China, save for those that sell to Russia.
Investment strategies remain consistent.
The study indicated that the proportion of respondents wanting to boost company investment in China remained roughly the same as last year at around two-thirds.
Additionally, the percentage of respondents who are not contemplating relocating production or sourcing remained stable at 83 percent, the same level as in 2019.
Respondents to the AmCham study expressed continued optimism about China’s market potential, not just for consumers but also for resources and industries.
Aerospace, oil and gas, and energy were among the areas where well over two-thirds of respondents indicated that the quality of China’s investment climate was improving.
However, more enterprises anticipated investments on a lower scale this year, and 18 percent said that tensions between the United States and China might postpone or cancel China’s investment choices.
Significantly fewer enterprises expressed confidence in Beijing’s promise to progressively liberalize the domestic market over the next three years.
Singaporean and German investors raised their investment by 29.7 percent and 16.4 percent, respectively, the government reported in January, without giving other nations’ data.
According to National Bureau of Statistics statistics acquired through Wind, US investment in China amounted to approximately 20% of foreign direct investment in the nation in the years preceding the outbreak.