Half of US Companies See Bright Outlook for China Business... Optimism Hits Record Low

Shanghai-based US Chamber of Commerce Survey
"Optimistic about China Business" 52%... Down 3%P from Last Year

The number of U.S. companies optimistic about their business in China has dropped to the lowest level in 24 years.

According to Bloomberg News on the 18th (local time), a survey conducted by the American Chamber of Commerce in Shanghai among its members found that 52.0% of U.S. companies responded that their outlook on business in China was optimistic or somewhat optimistic. This is a 3 percentage point decrease from 55.0% last year, marking the lowest level since the survey began in 1999, 24 years ago.

Companies that responded neutrally about their business outlook in China accounted for 25.0%, while those who were pessimistic or somewhat pessimistic made up 23.0%. Notably, the proportion of companies with a pessimistic outlook on the Chinese economy was higher than in 2018 and 2019 (7.0% and 21.0%, respectively), when the U.S.-China trade war escalated.

The Shanghai American Chamber of Commerce analyzed, "Concerns about geopolitics, U.S.-China relations, and the sluggish Chinese economy are weighing down expectations for the Chinese economy."

When the Chinese government lifted COVID-19 lockdown measures last year, expectations for an economic recovery in China spread early this year. In particular, the Chinese government showed a strong commitment to active reform, opening up, and expanding foreign investment, raising market expectations. However, due to consumption stagnation, weak employment, and a real estate crisis, the Chinese economy did not improve easily, and Chinese authorities have been reluctant to announce large-scale stimulus measures to revive the economy. Within less than a year, optimism turned into pessimism. Furthermore, with escalating U.S.-China tensions, Western companies' anxieties have also increased.

Twenty percent of U.S. companies participating in this survey said they are considering relocating their production bases in China to other locations within the next few years due to U.S.-China conflicts. These companies cited South Asia, the United States, and Mexico as alternatives to China.

They also stated that making profits in the Chinese market has become more difficult. Only 68% of companies reported making profits in China last year, the lowest figure since the survey began. Companies that forecasted that their sales growth rate in China over the next 3 to 5 years would outpace global growth accounted for only 40%.

However, one-third of companies said they plan to expand investments in China this year, an increase compared to last year. These companies cited the lifting of COVID-19 lockdowns and China's growth potential as reasons for expanding investments.

Amid growing concerns about the Chinese economic crisis, authorities are sending conciliatory gestures by emphasizing improvements in the investment environment and financial support for foreign companies. On the 18th, Pan Gongsheng, Governor of the People's Bank of China, hosted a symposium inviting foreign financial institutions and companies, stating, "Actively attracting and utilizing foreign investment is an important part of promoting a high level of openness and building an open economic system," and added, "We will improve policies and create a market-oriented business environment."

Sean Stein, President of the Shanghai American Chamber of Commerce, referred to U.S. Commerce Secretary Gina Raimondo's visit to China last month, saying, "There has been very good progress in U.S.-China relations over the past few months," and added, "(U.S.-China relations) is a really important issue, so this could potentially influence our optimism or pessimism about the Chinese economy."