Caixin
Aug 14, 2020 06:05 AM
WORLD

American Companies Still Optimistic About China Business Outlook

A survey found 86% American companies reported that U.S.-China bilateral trade tensions have affected their business with China.
A survey found 86% American companies reported that U.S.-China bilateral trade tensions have affected their business with China.

Reading U.S. President Donald Trump’s tweets, one might think U.S-China relations are hitting rock bottom. But for American companies doing business in China, things are not that bad, a survey showed.

The U.S.-China Business Council (USCBC) found that nearly 70% of member companies said they are optimistic about the five-year business outlook in China, the group reported Tuesday. Its survey showed that 83% counted China as either the top priority for their company’s global strategy or among the top five. At the same time, 86% of the organization’s more than 200 member companies reported that bilateral trade tensions have affected their business in China.

Reflecting long-term confidence in the China market, 87% of companies reported no plans to move production out of China, while only 4% said they shifted or planned to shift operations to the U.S. because of lagging consumer demand in China. The remaining 11% reported recent or planned production moves to other parts of the world, with Thailand and Mexico the leading alternative destinations.

Profitability is a key factor supporting long-term confidence in the China market. The survey showed that 91% of companies indicate their China operations are profitable, though at a lower margin than before. In 2019, 69% of American companies said they achieved revenue growth in China, down from 79% in 2018 and 87% in 2017.

The Phase One trade deal signed in January also boosted American companies’ confidence, with 88% reporting a positive or somewhat positive view of the agreement. On the implementation of the trade deal, a significant portion — 35% — took a neutral view, suggesting that many are still waiting to see whether all commitments will be met.

American companies’ support for the trade deal stems less from the commitments in the agreement than from the perception that the agreement is a stabilizing force in an otherwise rapidly deteriorating bilateral relationship, USCBC said.

The survey was conducted in late May and June. Since then, Trump and his administration have ramped up rhetoric and actions on U.S.-China decoupling, especially in the technology and financial sectors. Steps include threatening broad sanctions against Chinese-owned short video app TikTok and social media platform WeChat as well as proposals to bar U.S. listings of Chinese companies that fail to meet U.S. accounting standards.

At a separate forum Wednesday in Beijing organized by The Beijing News, Fuyao Glass Industry Group founder and Chairman Cao Dewang said decoupling the Chinese and U.S. economies would be irrational and a disaster for both countries as the world’s two biggest economies heavily rely on each other. Fuyao opened an automotive glass factory in Ohio that was featured in the Netflix documentary “American Factory,” produced by the Obamas.

Others at the forum said the possibility of decoupling can’t be totally ruled out even though both countries would pay a heavy price. If U.S. politicians are willing to sacrifice certain economic benefits to meet a political goal of restraining China’s development, decoupling is not impossible, especially in areas such as high technology, said Yu Yongding, a senior fellow at the Chinese Academy of Social Sciences, a government think tank.

For example, if the U.S. government gives Qualcomm some compensation, the American computer chip giant may agree not to sell products to China, Yu said.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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