[South China Morning Post] US firms’ confidence in China’s economy is rising, but so are fears over bilateral tensions: survey

• AmCham China poll finds a sharp increase in negative sentiment regarding the impact of souring relations between the world’s two largest economies
• However, more business executives are visiting China, and more foreigners say theywould consider moving to China

The deterioration of bilateral relations is increasingly raising concerns among American businesses operating in China, even as their overall outlook on the Chinese economy is improving, according to the latest survey results from the American Chamber of Commerce (AmCham) in China.

A total of 59 per cent of 109 respondents had a positive outlook on China’s economicrecovery in AmCham’s latest “flash survey” conducted from April 18-20, marking a significant increase from 33 per cent in the previous survey results released in Marchafter 319 respondents were polled in October, November and February.

Yet, pessimistic views on bilateral relations have worsened, rising across the two surveys from 73 per cent to 87 per cent. “In fact, it’s hard to see at this point when they will begin to improve. And this affects the ability of businesses to operate across borders,” AmCham China policy committee chair Lester Ross said on Wednesday, when the latest survey results were released.

“Once Covid is gone, we’ll go back to the things that initially have been challenging in terms of investment into China over the years,” said Michael Hart, the president of AmCham China.

The report said that 43 per cent of regional and global executives among AmCham’s surveyed members have paid visits to China since December, when China started to lift most coronavirus policies before completely scrapping quarantine requirements for incoming visitors in January.

The flash report showed that 40 per cent of AmCham members have no plans to change their investments from 2023-25. And more than a quarter – 26 per cent – reported that their plans for the period were uncertain, while 24 per cent said they were planning toincrease investments at different levels.

Yet, 17 per cent of AmCham members engaged in tech or research and development said they planned to decrease their investments – the highest total among all sectors. Most members – 73 per cent- said they had no plans to move their supply chains outsideof China, while 23 per cent were either considering relocating or had already started the process.

While this represented only a minor change from the survey in March – when the two respective numbers were reported at 74 per cent and 24 per cent – the latest survey said 27 per cent of companies considering relocation had reprioritised other countries, marking a 21 percentage point increase from the March results.

While Covid restrictions are no longer a concern for AmCham businesses, the AmCham president said that the impact of China’s approach in Covid-control policies could still befelt when it comes to companies making decisions to mitigate future risks in the supply chain. “When we talk to companies, they say, ‘We don’t want to decouple from China, but we want to de-risk it’,” Hart said, noting that they want to avoid “a single point of failure” bynot being overly reliant on a single country or a single supplier. “The lockdown in Shanghai was a wake-up call for folks,” Hart said, referring to the city’s months-long lockdown last year. “I think it has really focused folks in terms of risk planning.”