U.S. business optimism in China rebounds to pre-trade war levels -survey

September 23, 2021

SHANGHAI (Reuters) – U.S. companies’ optimism about business conditions in China has recovered to hit three-year highs even though the firms have reservations about Beijing’s COVID-19 policy, an annual survey showed on Thursday.

Beijing’s wide-ranging crackdown on companies has also unnerved U.S. firms, an American industry lobby executive said.

The American Chamber of Commerce in Shanghai, which conducted the survey with consultancy PwC China, attributed the renewed optimism to rising revenues as well as ebbing concerns over the COVID-19 pandemic in China, which has largely gotten control over its spread with a zero-tolerance policy.

U.S.-China relations reached a nadir in 2019 during the Trump administration, which launched a bruising trade war with China and also floated sanctions toward some of China’s highest-profile tech companies.

The Biden administration, however, has shown more reservation towards taking direct action against Beijing, though relations remain tense.

“Business in China recovered quickly from last year’s lockdown,” said Ker Gibbs, president of the American Chamber of Commerce in Shanghai which published the survey that was conducted between mid-June and mid-July.

“However, we are still feeling the pandemic’s effects, with members continuing to be negatively impacted by China’s travel restrictions. Overall business performance is good but there are signs of nervousness.”

Of the 338 respondent companies, 78% described themselves as “optimistic or slightly optimistic” about their five-year business outlook in 2021, nearly 20 percentage points more from 2020 and a return toward 2018 levels, the survey said.

By contrast, in 2021, 10% of respondent companies described themselves as “pessimistic” about their five-year outlook, compared to 18% and 21% of respondents in 2020 and 2019, respectively.

But firms expressed reservations toward some Chinese policy in the aftermath of COVID-19, especially with respect to hiring labour, the survey said.

About two-thirds of respondents said they plan to increase their China headcount this year, a 31.4 percentage point increase from 2020, but 62.3% of respondents described workforce availability as posing some hindrance or a serious hindrance to operations.

China’s borders remained closed to most visitors without proper work and residence permits, and all entrants must complete at least two-week quarantine upon arrival.

Companies also reported a slight dip in policy transparency. In 2021, 46.7% of respondents called the regulatory environment transparent, down from 51.4% the year prior.

Those figures come during a year of ongoing regulatory tightening from Chinese authorities targeting a range of industries, as well as the implementation of new laws governing data privacy and data security.

“Further hindering our members, many regulatory changes were enacted after our survey closed. While well-intentioned, they were announced with little or no warning, which has unsettled companies,” Gibbs added.

(Reporting by Josh Horwitz; Editing by Muralikumar Anantharaman)

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