U.S. Business Optimism About China Outlook Drops To Record Low

Optimism among American companies about the future business outlook in China has dropped to a record low, according to an annual membership survey from the U.S.-China Business Council, or USCBC, released today.

China’s Covid-19 containment strategy now poses the top challenge to businesses, said the council, which presents more than 270 American companies doing business in China including multinationals such GM, Honeywell, McDonald’s, Microsoft, Starbucks and the Carlyle Group.

Ninety-six percent of companies were negatively impacted by China’s Covid-19 control measures and more than 50% say their investment plans were paused, delayed, or canceled as a result, the council said.

Overall U.S.-China relations continue to rank among companies’ top challenges, along with Chinese policies on issues ranging from data, personal information, and cybersecurity to government procurement and intellectual property, the council said. As a result, the pace of planned new investment by American companies in China is expected to slow next year, it noted.

Whether or not that happens isn’t certain. “It is unclear if this pause in future capacity growth is another temporary blip or one point in a longer trend. We certainly see the Chinese government taking steps to prevent a repeat of the Shanghai lockdowns, but the current strategy still leaves a significant amount of uncertainty,” said USCBC President Craig Allen in a statement.

“Longstanding challenges with Chinese industrial policy continue, while relatively newer concerns are cropping up and intensifying, such as those related to US-China geopolitical tensions and data security policy, both of which contribute to technological decoupling fears,” he said. “That would not be in anyone’s interest.”

“We worry that the economic relationship, which helps stabilize the overall relationship, isn’t being properly prioritized,” Allen said. “At tense times like these, we should capitalize on any opportunity for stability, and USCBC urges both countries to build upon the hard-earned commercial progress achieved over the last several decades and address outstanding barriers to doing business in China.”

American business representatives also voiced concerns about the business outlook in China at the U.S.-China Business Forum organized by Forbes China and held at Forbes on Fifth on Aug. 9. “What we do see is that across the board is the consensus it’s getting harder to do business,” said American Chamber of Commerce in Shanghai Chairman Sea Stein. “There are a lot of things that make it more difficult for American companies to do business in China.”

One indicator of potential continued U.S. business interest: American companies also continued to report strong performance metrics for the last year, with 89% saying their China operations are profitable, USCBC said.

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