A new survey of American companies operating in China has indicated that most of them consider the country’s market critical despite fraying bilateral relations, tariffs, economic weakness and lost market share. Nearly all respondents participating in an annual U.S.-China Business Council survey said they cannot remain globally competitive without their business in China. This is despite the fact that a growing number of U.S. firms report dropping sales, reputational damage and pressure on profitability in the face of growing geopolitical tensions and trade issues, and stricter investment restrictions. Moreover, although leaving China is not viable for many American firms, the group said that fewer than half of survey respondents are optimistic about the future, given persistent concerns over tariffs, China’s deflation and insufficient demand, and policy uncertainty.
The survey covered about 130 of the group’s 270 member firms, most of which are large corporations that have been in China for over 20 years, and was conducted between March and May. Council President Sean Stein, in an interview with the South China Morning Post called for current bilateral trade talks to address issues other than just tariffs and export controls. “Now it feels like all of the negotiation oxygen is being taken up by tariffs and export controls. What we need to make sure is whether both sides actually do want to have robust American investment in China. There are various places where American or foreign companies generally don’t enjoy the same market access, the same benefits as Chinese companies. One of the real challenges is unequal treatment with Chinese competition,” he said. Beijing has laid out a reform road map to make investing easier, fairer, less risky, and more profitable for foreign companies. “Our hope is that the negotiations with the U.S. can help move that process along more quickly, so that investment can recover,” Stein said.
On the prospects of a trade deal, he said: “I think both now realize they have the ability to do significant economic harm to the other and that they need to tread carefully on things like weaponizing supply chains and exports. That’s very healthy for the two countries to have that common understanding”. He also said China has become more confident. “The Chinese now have greater self-confidence and that is going to make it much more difficult for the U.S. to negotiate a deal,” he said.
Stein said he hopes talks can help both sides agree on the value of U.S. and foreign investment in China and on how to improve the investment climate. Stein said that the Chinese economy overall is definitely in “a better place”. “American companies will almost all tell you the Chinese economy is on a more stable footing and is looking better now than it was a year ago.” The No.2 challenge last year was the macro economy, but it has fallen to No.5, he said. “Certainly the status of the economy is a significant concern, but not so much as it was last year.” Tariffs rose from eighth to second place among all top concerns, with 68% of companies expressing alarm over U.S. President Donald Trump’s April 2 “Liberation Day” tariffs.
