Foreign Companies in China Are Less Optimistic About Investing There

Many survey respondents said China’s travel restrictions related to its zero-tolerance policy toward Covid-19 was a headwind when it came to attracting and retaining talent. More than three-fourths said qualified job candidates were unable to move to China, up from 37% the previous year. Almost one-third said candidates were unwilling to move, up from 18%.

Collectively, businesses said tensions between the U.S. and China remained the top concern, despite high expectations in the prior year’s survey that relations would improve under the Biden administration. Inconsistent or unclear regulations in China and rising labor costs, were other leading worries.

“I think reality has in a way set in, in that at least some, if not many, of the actions by the Trump administration remain in place,” said Alan Beebe, the president of AmCham China. They included launching a trade war and imposing a raft of sanctions against Chinese technology companies.

Foreign companies in China have faced an expanding array of challenges as relations between Washington and Beijing have soured, with companies operating in the country finding themselves under fire from political figures from both sides for their actions or statements on subjects such as forced labor in supply chains.

Although the survey found growing pessimism about some aspects of the business environment in China, many businesses reported on-the-ground improvements.

China’s economy grew 8.1% last year as it pulled out of its pandemic slump. That growth was reflected in the bottom lines of survey respondents: Nearly 60% of companies surveyed said the revenue from their China operations rose last year, up from 35% the previous year.

Almost 90% said they were either profitable or breaking even in China, up from 80% the prior year.

Economists don’t expect China’s growth pace to be sustained.

Last week, Beijing set a growth target this year of around 5.5%, the slowest pace in about a quarter-century of economic planning, reflecting growing domestic and global uncertainties.

AmCham surveyed its members between Oct. 22 and Nov. 19, with 353, or 49%, responding. To be eligible, respondents had to have a U.S. business entity, meaning the response pool included some companies with headquarters in Europe and other regions.

Nearly all members surveyed said the pandemic was disrupting global business travel, while more than half said it was leading to higher costs of products and services.

Despite the challenges, 60% of respondents said China remained a priority, and 83% said they weren’t considering relocating manufacturing or sourcing outside of the country, a figure that held steady the past three years.

More than 40% of respondents in the AmCham survey reported increased pressure to either make or not make politically sensitive statements compared with the previous year. Companies operating in the consumer and tech sectors reported the largest increase in such pressure.

U.S. businesses have faced growing pressure from Washington to curb their ties to Xinjiang amid concerns over forced labor and a broader crackdown in the region.

Foreign brands that have taken a stand on Xinjiang have faced backlash from the Chinese government and boycotts by consumers.

Last March, Chinese internet regulators all but erased H&M Hennes & Mauritz HM.B 1.96% AB from the Chinese internet after its decision to stop sourcing from Xinjiang. The fast-fashion company has said it follows international guidelines for supply-chain sustainability.

Corrections & Amplifications
AmCham surveyed its members between Oct. 22 and Nov. 19, with 353, or 49% responding. An earlier version of this article incorrectly said it surveyed 353 of its members. (Corrected on March 8)

Write to Dan Strumpf at [email protected]