According to an analysis, the investment sentiment of American companies operating in China has not rapidly recovered even after the reopening of the economy following the abandonment of the "Zero COVID" policy.
On the 1st (local time), The Wall Street Journal (WSJ) reported that due to escalating geopolitical tensions between the U.S. and China and regulatory uncertainties from Chinese authorities, American companies are maintaining a cautious stance on expanding their investments in China.
The American Chamber of Commerce in China, citing the results of a recent survey of 319 member companies, stated that there were no signs of a recovery in anti-China sentiment among U.S. companies even after the economic reopening following the lifting of China's COVID-19 restrictions. It added that it is difficult to find cases of companies turning back to China as an investment destination even after the economic reopening.
The American Chamber of Commerce in China said that only 45% of respondents answered that China ranked among the top three countries in their global investment priorities this year. This figure has significantly decreased from 59% in 2019, before the outbreak of the COVID-19 pandemic.
WSJ interpreted these results as being due to heightened U.S.-China tensions, inconsistent regulatory interpretations, and political risks stemming from the consolidation of a one-person power system. According to the survey, about half of the American companies with operations in China recorded annual losses in their Chinese businesses last year, and more than one-third experienced a decline in sales, showing a significant deterioration in performance.
However, WSJ noted that some American companies, such as those in the food and apparel sectors, are increasing their investments in the Chinese market again after a pause caused by U.S.-China conflicts, with most of these being consumer goods companies.
Earlier, Starbucks announced plans to open 3,000 new stores in China by 2025. McDonald's also stated it would open 900 new stores in China this year. U.S. meat processor Tyson Foods and Spam manufacturer Hormel have decided to significantly expand their operations in China by building new factories. Apparel companies Tapestry, which owns fashion brands Coach and Kate Spade, and Ralph Lauren are also increasing the number of new stores in China.
WSJ diagnosed that China's economic recovery is being driven by consumers rather than government-led fiscal stimulus and massive investments, and that the ripple effect of China's economic recovery on the global economy will be smaller than in previous years.
The trend of escaping from China, the "world's factory," due to the collapse of global supply chains caused by China's lockdowns during the COVID-19 pandemic is also influencing these changes in the investment environment.
Michael Hart, chairman of the Chamber of Commerce, evaluated that U.S. companies have not been able to escape the nightmare they experienced in the Chinese market over the past three years due to supply chain disruptions.
Geopolitical conflicts between the U.S. and China, which have escalated recently due to the "spy balloon" incident, are also cited as a major risk. On the 16th of last month, China imposed sanctions on Lockheed Martin and Raytheon, which sold weapons to Taiwan. This was a retaliatory measure against the U.S. sanctions on Chinese companies related to the Chinese spy balloon's entry into U.S. airspace. Since then, the Biden administration has been considering canceling export licenses to American companies such as Qualcomm and Intel, which supply parts to Huawei, continuing the sanction boomerang between the U.S. and China.
Projections that China's population growth, which was a driving force behind its rapid growth, has declined and that China will no longer be a driving force in the global economy are also fueling this worsening investment sentiment. China's population is expected to decline rapidly starting this year, falling below 1.3 billion by 2042 and dropping below 1 billion by 2069.
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