A report released by the American Chamber of Commerce in Shanghai claims that doing business in China is becoming more and more risky.
In a recent report, the American Chamber of Commerce in Shanghai highlighted that corporations are being forced to manage risk due to escalating trade tensions between the US and China as well as a weakening Chinese economy.
According to the Chamber’s research, the 2024 China Business Survey, which was made public on September 12, up to 40% of the businesses are reallocating capital that was originally intended for China. The most popular option is thought to be emerging potential in regions like south-east Asia and India.
According to the survey, a significant proportion of US corporations operating in China—more than two-thirds—are undergoing some form of de-risking, and a quarter are separating data based on whether it is from China or not. Up to 20% of US businesses doing business in China are anticipated to reduce their investments this year as well; last year, that percentage was up to 25%. According to the Chamber, the main cause of the decline in foreign investment in China is the country’s sluggish economy.
It is concerning to see that industry appears to be underestimating the Chinese government’s capacity to boost demand. “This year’s data indicates that while many positive policies have been announced, they have yet to fully restore confidence among private businesses or consumers in general,” Allan Gabor, Chair of AmCham Shanghai remarked. The likelihood of a disruption is clear because the chamber has begun discussing difficult decisions. Gabor said that US corporations “must now manage a changing environment that may require them to make tough near-term decisions as they adjust their businesses to navigate new market and geopolitical dynamics.”
Geopolitical risks are “weighing more than ever,” according to Eric Zheng, President of AmCham Shanghai, who also urged both countries to hold bilateral talks “so as to stabilize the relationship.”
Large prospective investments are “waiting at the door, hinged on further market reform,” according to Jeff Yuan of PwC China.
With participation from 1,000 businesses, the study, which was completed by 306 AmCham Shanghai members, is regarded as one of the oldest studies of US business in China.
The most recent research draws attention to a pattern that has begun to emerge in China. Some of Apple Inc.’s manufacturing has been sent to India, while IBM Inc. recently closed its research site in China, which resulted in employment losses. Walmart also sold all of its stock in the massive Chinese e-commerce company JD.com.
According to Bloomberg News, which cited a source familiar with the situation, Apple Inc. has already started to see results from its pivot, with India sales increasing 33% year over year to a record high of about $8 billion for the year ended March 2024.
Amidst development challenges, Chinese President Xi Jinping met with American business executives in March of this year to promote their investment in China. IMF Managing Director Kristalina Georgieva, World Bank President Ajay Banga, and representatives of more than a hundred multinational corporations were present at the meeting.
