U.S. Companies in China Say Political Tensions Remain Top Concern
March 08 2021 - 10:02PM
Dow Jones News
By Trefor Moss
SHANGHAI--U.S.-China political tensions remain the top concern
for American companies in China despite some optimism about the
relationship improving under President Biden, according to
companies surveyed by the American Chamber of Commerce in
China.
Half of U.S. companies are pessimistic about the effect that the
bilateral relations could have on their China business over the
next two years, with only 16% of respondents expressing optimism,
according to the chamber's annual Business Climate Survey, which
was published Tuesday in Beijing. The chamber surveyed 345
companies in October and November 2020.
The pessimism comes despite 50% of respondents predicting the
tone of the U.S.-China relationship would likely improve this year
following the change in leadership in Washington, up from just 30%
of respondents last year who thought relations would improve.
"The relationship remains contentious," Greg Gilligan, AmCham
China's chairman, said in an interview. The caution among U.S.
companies reflects a belief that, under President Biden, "we're
returning to a more traditional bilateral relationship and
diplomacy, but we're not returning to a lower level of tension in
the relationship," he said.
China was the only major world economy to expand last year, and
served as a lifeline for a range of large U.S. companies, including
Starbucks Corp., Nike Inc. and Tesla Inc., which reported growing
sales in China even as its other markets were crushed by the
pandemic.
A majority of survey respondents, 56%, reported earning a profit
in China last year, though one-fifth suffered losses, up from 11%
reporting losses in 2019. Two-thirds of U.S. companies said their
revenue in China rose or remained stable in 2020--below the 79%
that reported increasing or steady sales in last year's survey.
Consumption has been slower to bounce back in China compared
with manufacturing and other sectors of the world's second-largest
economy, and U.S. consumer brands largely underperformed their
industrial peers. A majority of U.S. companies in the consumer
sector, 54%, said China revenue fell in 2020, with the remainder
saying sales had risen or stayed roughly the same.
Travel disruptions were perhaps the most important
coronavirus-related impact for U.S. companies in China. About 52%
of respondents said travel restrictions had hurt their operations.
Foreign companies have struggled to return staff to China, whose
borders have been largely closed for the past year, or to replace
foreign employees who have left.
At the same time, many U.S. companies said some longer standing
complaints about doing business in China--primarily related to
market access and bureaucratic red tape--are receding, as Beijing
delivers on long-promised reforms.
Exactly half of surveyed companies said China's business
environment is improving, compared with just 12% that thought it
was getting worse, while 61% expressed confidence that Beijing is
committed to further opening up its economy to foreign investment
over the next three years.
Two-thirds of respondents said their companies would increase
investment in their China operations this year.
Only 37% of U.S. companies felt that the risks of
intellectual-property leakage or data-security threats were greater
in China than in other markets, lower than the 53% of respondents
who felt this way two years earlier.
As the Biden administration formulates its China policy, it is
important to be aware of these positive developments, Mr. Gilligan
said. Enabling U.S. companies to operate in China is "good for the
American economy and the American people," he said, urging
Washington "to change what's not working well and keep what
is."
In particular, Mr. Gilligan said, national security interests
should be narrowly defined to allow companies in nonsensitive areas
to continue operating freely.
While U.S. companies have continued to function normally in
China despite the high-level political strife, executives remain
concerned that tensions could spill over into the commercial realm,
resulting in Beijing singling out U.S. companies for reprisals, Mr.
Gilligan said.
Write to Trefor Moss at Trefor.Moss@wsj.com
(END) Dow Jones Newswires
March 08, 2021 22:47 ET (03:47 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
Starbucks (NASDAQ:SBUX)
Historical Stock Chart
From Feb 2024 to Mar 2024
Starbucks (NASDAQ:SBUX)
Historical Stock Chart
From Mar 2023 to Mar 2024