Online Reporter
A record share of American firms froze investments in China as trade ties worsened earlier this year, a recent survey suggests.
Fewer than half of the companies surveyed by the US-China Business Council between March and May said they planned to invest in China in 2025, a drop from 80 percent last year and a record low since the group began asking a similar question in 2006, according to the Wednesday report.
While the annual survey was conducted before the easing of tensions following the countries’ talks in London last month, the sharp fall in sentiment underscores the damaging effect of the trade war on investment in the world’s second-largest economy.
Companies are in a “wait-and-see mode,” Kyle Sullivan, vice president of business advisory services at the USCBC, said in a briefing. “They are riding out the uncertainty in trade policy.”
The survey covers large, US-headquartered multinational companies, with over 40 percent of respondents representing companies that generated at least US$1 billion in revenue in China last year.
US companies have invested heavily in manufacturing in China over the last few decades, taking advantage of relatively cheap labour and the country’s increasingly wealthy consumers. But rising trade barriers and China’s growth slowdown have prompted companies to reassess their presence.
While the country remains an appealing hub for manufacturing and innovation, 75 percent of respondents cited China’s retaliatory tariffs as their top cost concern, as they often rely on inputs from the US.
A record 27 percent of companies said they moved or planned to move some operations out of China, the highest since at least 2016.
Beijing and Washington have seen relations thaw after both sides agreed to approve exports of crucial technologies, with Chinese exports to the US narrowing their drop in June. — Bloomberg
Bongani Ndlovu