Foreign companies operating in China say tensions with Washington over technology, trade and other issues and uncertainty over Chinese policies are damaging the business environment and causing some to reassess their plans for investing in the giant market.
The results of surveys released yesterday by the American Chamber of Commerce in Shanghai and by the European Union Chamber of Commerce in China largely concurred in appealing for greater certainty and clarity over China’s stance toward foreign businesses.
“For decades, European companies thrived in China, benefitting from a stable and efficient business environment. However, after the turbulent past three years, many have reevaluated their basic assumptions about the Chinese market,” Jens Eskelund, the EU Chamber’s president said, in a letter that accompanied the report.
Eskelund said that predictability and reliability had been undermined by “erratic policy shifts,” hurting confidence in China’s growth prospects.
“At the top of a growing list of questions about the Chinese market is, what kind of relationship does China want to have with foreign enterprises?” he said.
The Shanghai AmCham’s survey showed a continued downgrading of China’s importance as an overseas destination for investment, even though two-thirds of the 325 companies responding said they had no immediate plans to change their China strategy.
Just over one in five of the companies surveyed said they were decreasing their investment in China this year, with the top reason being uncertainty about the U.S.-China trade relationship, followed by expectations of slower growth in China, it said.
Overall, the survey showed sentiment worsened from last year, when companies were embroiled in disruptions from “zero-COVID” policies that caused parts of entire cities, transport networks and travel to be shut down, sometimes for weeks at a time.
Such disruptions were a major “push factor” that companies cited in expanding their operations outside China, the survey showed.
Asked about the survey, a Foreign Ministry spokesperson said that Beijing has recently taken measures to attract foreign investment and that China welcomes foreign companies to invest and operate in China.
“What I can tell you is that China’s economy is resilient, promising and dynamic, and the fundamentals of long-term development have not changed,” said the spokesperson, Mao Ning.
“The outstanding advantages of a super-sized market and a complete industrial system have also remained unchanged,” she said.
While 52% of those surveyed by AmCham Shanghai said they were optimistic about their five-year business outlook in China, that was the lowest figure since the group began the annual survey in 1999.
Nearly nine in 10 companies said rising costs were a big challenge.
Intensifying competition has also been worsened by policies that favor local companies over foreign ones and courts that tend to favor Chinese companies in decisions on protection of intellectual property such as patents and trademarks, the chamber said.
Companies face a growing threat from “nimble, innovative local businesses and state-owned enterprises, which have enjoyed stronger support in recent years.
Companies that are limiting their commitment to the China market included those selling technology hardware, software and services — an area hit hard by trade sanctions imposed in the name of national security, mostly by Washington.
Others include education and training — industries that have suffered in a crackdown on private education companies, and banking and other financial industries.
Southeast Asia ranked as the top choice for the 40% of companies shifting their investments to places outside China, followed by the U.S. and Mexico, the survey said.
ELAINE KURTENBACH, MDT/AP
