U.S. Business Sentiment Picks Up in China, But Still Weak: Survey

(Beijing) — U.S. firms in China saw business rebound last year as they boosted efficiency. But they remained cautious about the year ahead as the local economy slows and uncertainties swirl about future bilateral ties, according to an annual survey released on Wednesday.

In terms of actual business, 58% of U.S. companies in China said they expected their revenue would grow in 2016, up from 55% the previous year, according to the annual business sentiment survey from the American Chamber of Commerce in China. Similarly, the 68% of companies that said their China operations were profitable last year was up from 64% in 2015.

Despite the business rebound, overall sentiment was still cautious ahead of the upcoming inauguration of U.S. President-elect Donald Trump, who has accused China of stealing American jobs and being a currency manipulator. Concerns also remain about a continued slowdown in China’s economy, with the average respondent forecasting 6.1% growth this year, down sharply from an anticipated 6.7% in 2016.

“The country remains an important market for most multinationals, but we are seeing a significant shift in what foreign businesses are prioritizing,” said Stephen Shih, a partner at Bain, which worked with AmCham to compile the survey. “Innovation in China and operational efficiency will need to be at the top of the agenda for companies in 2017. More companies will also be re-evaluating the role of China in their global portfolio of markets.”

Most signals have indicated China’s economic growth is slowing rapidly from headier days when annual expansion of 10% or more was the norm. Foreign direct investment, a major source of economic activity in previous years, grew a relatively mild 4.1% last year, down from 6.4% in 2015.

Among U.S. companies surveyed, 69% said they were planning new investment in China this year, rebounding slightly from last year’s 68%, which was the lowest level since the global economic crisis of 2008.

Sentiment remained similarly cautious on the future of Sino-U.S. relations, with 33% of respondents saying the relationship would deteriorate under Trump and 50% seeing no change.

“They are cautiously optimistic about the future,” said Christopher Balding, a professor at the HSBC Business School at Peking University Shenzhen. “They’re concerned about the political implications of the relationship between China and the U.S.

“Beijing has said if Trump cracks down, they will go after foreign firms. So that’s got to be a concern. They are tapering their investment plans, but I think they’re cautiously optimistic that a lot of these problems will get worked out in the future.”

AmCham conducted the survey by analyzing 462 responses from its 849 member companies about their outlook on China.

Contact reporter Yang Ge (geyang@caixin.com)