U.S. companies in China remain profitable and optimistic about their growth prospects, despite trade tensions and the pandemic, according to a survey conducted by the U.S.-China Business Council in June among 107 U.S. firms operating in China. The survey found that 95% of respondents said they made a profit last year, up from 91% the previous year. The companies’ long-term confidence in the China market seemed not to have been dented by the strained relations between the two countries, as evidenced partly by the finding that 83% of surveyed companies had not moved any parts of their supply chains out of China in the past year. Of those that did so out, only 2% moved one or more segments to the United States. In the previous survey, 4% of those who were planning to take operations out of the China market intended to return to the U.S. “That a relatively small number of companies shifted supply chains shows the strength of China’s supply-chain ecosystems and the difficulty of relocating,” the survey’s report noted, although it cautioned that this may not be the case indefinitely.
Already, 64% of the companies saw revenue growth in 2020, and 70% of surveyed companies expect their revenue to increase in 2021, bouncing back to pre-Covid-19 and trade tension levels. It also reported that 78% of companies view China’s growth prospects as better than other emerging markets. In line with their strong performance and expected growth prospects, only 6% are curtailing investment, while 43% of those surveyed plan to increase commitments in China over the next year, compared with a quarter of companies that committed to do so in 2020.
Nevertheless, for the fourth consecutive year, companies say their top challenge is the rocky relationship between Washington and Beijing. Trade tensions have resulted in reputational damage to U.S. firms, lost sales, shifts in suppliers and heightened scrutiny from regulators in both the U.S. and China. “Even though we’ve seen a change in administration in the United States and the beginnings of an economic recovery, many of the underlying drivers of U.S.-China frictions remain unchanged,” USCBC President Craig Allen said at a virtual event introducing the survey. “Candid engagement between the two countries is a good start to reestablishing stability, but we need more of it,” he said. Competition with Chinese companies, travel restrictions and data flows also ranked among the top challenges for the companies this year, the China Daily reports.
