Night view of Lujiazui Financial District in central Shanghai.
Yongyuan Dai | E+ | Getty Images
Against the backdrop of tense Sino-U.S. relations and a slowdown in China’s economy, business confidence and profits of U.S. companies in China are at historic lows.
in a Annual report released ThursdayThe American Chamber of Commerce in Shanghai found that only 66% of the 306 member companies surveyed will make profits in 2023, which is the lowest level on record.
The survey also showed that key confidence indicators are at their worst ever levels. Only 47% of respondents are optimistic about business prospects in China in the next five years, while 25% of respondents cut their investment in China last year, a record high.
China’s economic slowdown was cited as the top reason for members’ lower investment. At the same time, tensions between Washington and Beijing and geopolitical tensions are seen as the biggest challenges facing its business operations and the Chinese economy as a whole.
“Increasing geopolitical pressure, especially in the run-up to the U.S. election, escalating trade tensions, and China’s economic slowdown, are leading companies to strengthen risk management and adjust investment strategies,” the chamber said in a statement.
The report comes amid many signs that the world’s second-largest economy is losing its luster among Western businesses.
While geopolitical tensions, strict regulations and scrutiny have long been risk factors for these companies, the country’s struggling economy is increasingly becoming a major concern.
according to a Member Survey Release A survey by the U.S.-China Business Council shows that this summer, China’s macroeconomic woes became the second-biggest concern for U.S. companies, second only to Sino-U.S. relations.
Similar to the survey by the American Chamber of Commerce in Shanghai, the committee found that more and more companies are pessimistic about their medium-term business prospects in China, with factors such as “weak domestic demand” and “overcapacity” limiting profitability.
The US-China Business Council added that companies have also lost market share to Chinese competitors who have received more government support.
According to a report released by the European Chamber of Commerce in China on Wednesday, EU companies are also feeling their difficulties in China.
The group said its companies are at a “tipping point” on whether to invest more in China amid low profit margins and poor prospects, and urged Beijing to take action if it wants the companies to invest further.
A spate of negative reports from Western business groups suggests Beijing’s recent efforts to improve conditions for foreign businesses and attract more foreign investment are not making progress.
In a statement about the American Chamber of Commerce in Shanghai survey, President Alan Garber said, “This year’s data shows that while many positive policies have been announced, confidence in the private sector or consumers at large has not yet been fully restored.”
Although more U.S. Chamber of Commerce members in the survey pointed to improvements in government policies and regulations from the previous year, only 22% of respondents expressed confidence in Beijing’s commitment to further opening up its industries in the short term.
However, “even as foreign companies face increasingly severe economic headwinds and fierce competition, staying in China is critical for them to remain globally competitive,” Yuan Jie, PwC’s China tax markets leader, said in a press release.
Regarding how the U.S. government can support companies in China, nearly half of the U.S. Chamber of Commerce respondents suggested lowering tariffs on Chinese goods.
Foreign direct investment in China fell by 29.6% The period from January to July compared with the same period last year, according to China’s Ministry of Commerce.
—CNBC’s Evelyn Cheng contributed to this report
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