American companies are pulling back on investments in China as profits in the nation are becoming elusive. Yuka Hayashi reports in The Wall Street Journal:
China has become a much tougher place to make money for American companies, a new survey found.
Escalating bilateral tensions are affecting various aspects of U.S. companies’ operations in China, including losses in sales, declines in profits and canceled or delayed investments, according to a survey of the U.S.-China Business Council’s member companies.
The ratio of companies expressing a pessimistic outlook on their China operations in five years hit a new high of 28% in the latest annual survey by the business group, up from 21% last year. Those holding optimistic views fell to a record low of 49%.
Signaling further declines in American business presence in the coming years, more than one-third of respondents said they have reduced or paused planned investment in China over the past year, a record high and well above the 22% in last year’s survey. Such decisions were attributed to increased costs and uncertainties of doing business in China, as well as more restrictions on selling products in the Chinese market.
The annual survey, conducted in June and July, was based on questionnaires sent to the business group’s 117 member companies, 39% of which reported at least $1 billion in revenue generated in China.
“Most companies remain profitable in China and recognize the Chinese market’s importance to their global competitiveness,” the groupsaid. “The pace with which U.S. business sentiment and future investments rebound will depend on the decisions of policy makers in China and the United States.”
Most companies in the survey are large U.S.-based multinationals that have operated in China for decades, the U.S.-China Business Council said.
Many American companies had expected their businesses to bounce back this year following a long stretch of stringent Covid-19 restrictions. Instead, they faced a slow recovery in the Chinese economy and more obstacles caused by geopolitical tensions, including tougher domestic policies in China linked to the bilateral rivalry.
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