U.S. Firms in China See Growth, Improved Ties After Pandemic

American businesses in China see their industries growing this year after the Covid-19 pandemic dented profits in 2020, with growing hopes the two nations will seek to mend ties, a survey by the American Chamber of Commerce shows.

Some 81% of the 345 respondents expect industry growth this year and 45% see relations with the U.S. improving, a jump of 15 percentage points from last year, according to a report released on Tuesday.

The surge in optimism on bilateral ties came on the back of Joe Biden’s election as the new U.S. president, AmCham China chairman Greg Gilligan said.

U.S. Firms in China See Growth, Improved Ties After Pandemic

“We think the issues remain the same, but stylistically things should improve with more traditional measures of diplomacy, including multilateralism, and frankly, getting back to the table for the U.S. and China to speak to each other,” Gilligan said in an interview with Bloomberg TV.

Gilligan also called on both countries to use “as narrowly as is appropriate” the ideas of national security and law enforcement, in order to broaden commercial opportunities.

Half of the survey respondents said the investment environment is improving and just 12% said it is deteriorating, the lowest proportion since the question was first introduced in the survey in 2012. Only 56% made profits in 2020, the least since the question was polled 19 years ago, with a fifth suffering losses.

“With China leading in economic recovery and the new U.S. administration in place, our members are cautiously optimistic regarding business growth in China,” Gilligan wrote in the report.

Global business travel disruptions, the inability for expatriate staff to return to China due to government entry restrictions, and uncertainty around business decision-making were the biggest ways in which the pandemic impacted American companies’ operations in China.

Despite emerging optimism, bilateral tensions were still seen as the companies’ biggest business challenge, followed by increasing labor costs, competition from private local companies, and inconsistent regulatory interpretation and unclear laws and enforcement.

Ensuring a level playing field is the top action Beijing could take to help foreign businesses, the survey shows. Meanwhile, Washington could help by refraining from aggressive rhetoric and tit-for-tat actions. The survey was conducted between October and November last year.

Other highlights:

  • The companies were treated most unfairly compared with local players when it comes to market access, public procurement and government subsidies, they said. Over 60% were confident the government will further open up markets to foreign investment
  • Only 37% of the respondents said the risks of intellectual property leakage and IT security threats are greater in China than in other markets, a steady decline from 54% in 2016
  • As to future bilateral trade talks, 71% of the respondents want to see progress made in further opening of Chinese markets, followed by strengthening IP protections at 48%, and lowering tariffs at 40%
  • Around a third plan to cut or keep investment unchanged in 2021, while 37% will raise it by no more than 10%
  • Companies in technology and other R&D-intensive industries are the most optimistic about market growth in 2021, with 86% projecting expansion
  • Consumer sector firms have the worst outlook, with 13% predicting market contraction. More than a half recorded a drop in revenue last year

©2021 Bloomberg L.P.

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