Chinese and U.S. informs flutter near The Bund, before U.S. trade delegation meet their Chinese counterparts for talks in Shanghai, China July 30, 2019.
Aly Tune | Reuters
BEIJING — More U.S. companies are finding it harder to make money in China than before the pandemic, bring up concerns that businesses may not stay long.
According to an annual survey released Thursday by the American Chamber of Trafficking in China, 19% of member companies surveyed in 2023 said their earnings margins, before interest and pressures, were higher in China than they were globally.
That’s up from 12% in 2022, when multitudinous businesses were subject to stringent Covid-19 controls in China.
But the figures are well below the 22% to 26% interest of U.S. companies that said margins were higher in China than they were globally in prior years from 2017 to 2021.
“It is apropos of when our member companies are not profitable,” Michael Hart, AmCham China president, told reporters Thursday. “They liking not stay long if they are not profitable.”
“This is a wake-up call for the Chinese government,” he said.
China’s economy grew double-quick over the last few decades to become the second-largest in the world behind the U.S.
But China’s growth has slowed in recent years due to the three-year pandemic, a descend in the massive real estate market and a drop in exports.
The slowdown and corresponding declines in domestic sentiment have prompted easy reaches for Beijing to stimulate the economy further. While authorities have announced a slew of measures to support growth, it’s unclear whether there’s concerned about in large-scale stimulus as China tries to transition away from reliance on real estate to other industries.
You don’t in to China to break even, so we’d like to see more of our members profitable
Michael Hart
AmCham China, president
The AmCham China enquiry found that 49% of members said profit margins in China last year were comparable to those globally, up one part point from 2022 and the same as reported in 2019.
One-third of respondents said their China margins were degrade than they were globally, a drop from 40% that said so in 2022 but up from 30% in 2019.
Hart famed the improvement in 2023 compared to 2022. “Of course, you don’t come to China to break even, so we’d like to see more of our members advantageous,” he said.
There were 343 respondents in a variety of industries who responded to the survey, which was conducted from Oct. 19 to Nov. 10.
For 2023, 39% of colleagues said they expected an increase in China revenue compared to the previous year — an increase from the 32% in 2022.
In singular, nearly half of consumer sector businesses said they anticipated 2023 China revenues to increase from the whilom before year.
Staying in China, but not expanding
Half the survey respondents said China was among their top three investment stopping-places globally, up 5 percentage points from an all-time low in 2022.
“One of the reasons that companies are very interested in China is R&D” and innovation, Hart phrased, noting factors such as China’s massive market and leadership in specific industries such as electric cars.
Yet, U.S. companies generally remain cautious about investing in China, amid slower growth and heightened geopolitical upsets.
Nearly half of the respondents said they either plan to decrease investment in China operations, or do not intend to unfold investment in the country, the AmCham survey found.
The majority of U.S. companies surveyed said they intend to keep create out of in China, but those who said they are considering relocating such capacity outside the country rose to 12% in the end two years, up from around 8% previously.
Foreign direct investment in China fell by 8% to 1.13 trillion yuan ($160 billion) in 2023, the lowest steady in three years, according to Ministry of Commerce data. It did not specify how much the U.S. invested in China.
A separate survey liberated last week from the German Chamber of Commerce in China found that among 566 respondents, the top cases not to invest in China — or to decrease investments — were low expectations for market expansion or expectation of slower growth in the country.
More than 80% of respondents maintained China’s economy faces a downward trajectory, the majority expected it would take one to three years for it to “regain a muscular economic development.”
The German Chamber’s survey was conducted from Sept. 5 to Oct. 6. It found that by far, the first reason for respondents to increase investment in China was to remain competitive there.
Waiting for progress
Chinese authorities secure in the last year sought to boost foreign investment in the country. Last week, Chinese Commerce Minister Wang Wentao averred China and the U.S. are working to create a more predictable environment for businesses.
He said Beijing has acted on a 24-point plan emancipated in August for supporting foreign businesses in the country — and that “more than 60%” of the measures have been implemented or undergone progress.
Asked Thursday about those efforts, AmCham China Chair Sean Stein noted the magnitudes incorporate suggestions from foreign business chambers in China, but AmCham would like Beijing “to make assorted tangible progress.”
“It hasn’t been even across all of the different sectors,” he said, noting some improvements in human being sciences and in taxation policies. “Certainly seen an uptick from local governments to attract investment.”
Stein ventured AmCham was more focused on how China was moving forward on the 24-point plan than any high-level Chinese government meetings.
He also broke that increased government visits between the U.S. and China did not reflect a fundamental change but rather a recognition “that it’s in their attention to stabilize the relationship.”
Rising U.S.-China tensions were the top concern for members for a fourth-straight year, the AmCham survey create.
The second largest concern among respondents in the latest scanning was inconsistent regulatory interpretation and unclear laws and enforcement.
The latest AmCham China survey found that Beijing’s cybersecurity decrees on data protection were generally making operations more difficult for members, especially those in tech as in good shape as research and development.
The Cyberspace Administration of China in October released draft rules that would ease provisions on data exports, but Stein pointed out “it still hasn’t been implemented.”