US companies in China pessimistic about revenue outlook

US companies in China pessimistic about revenue outlook

US companies in China have grown more pessimistic about their revenue prospects in the country, but say the main reason is slowing economic growth rather than the impact of tariffs, according to a business group poll. The proportion of companies surveyed by the American Chamber of Commerce in Shanghai that expect revenue to grow in China this year dropped by a third from last year to 50 per cent. Those expressing optimism about their prospects over the next five years dropped by a fifth to 61 per cent. However, they cited China’s slowing economy as a greater concern than the deepening trade war between Beijing and Washington. “Optimism about the three- to five-year business outlook is the lowest in many years,” said Ker Gibbs, head of the chamber. “An economic slowdown within the same period is the significant challenge anticipated by the most members.” Growth in China has slowed to its lowest level since the early 1990s, which economists attribute to weaker investment due to Beijing’s deleveraging campaign.US companies surveyed are more affected by domestic growth because more than half said they now primarily pursue an “in China for China” strategy, producing for Chinese domestic consumers and businesses rather than for export markets. Still, 51 per cent of the 333 companies surveyed reported a drop in China revenues as a result of tariffs imposed by both sides on hundreds of billions of dollars in trade since last year. Three quarters of responding companies said they opposed Washington’s tariffs on Chinese exports. “A pick-up in China’s economy would clearly shift some of the gloom, but an end to tariffs would be the most welcome news,” said Mr Gibbs. The poll by the chamber, which represents companies in Shanghai and surrounding provinces engaged in primarily financial services, pharmaceuticals and light manufacturing, found that 77 per cent of US companies in China were profitable. Despite calls from President Donald Trump for US companies to leave China, only a quarter of respondents said they had redirected investments to other locations — though that was up 7 percentage points from the previous year. Nearly half of companies surveyed said they were planning to invest more in China over the next year, down only slightly from previous years and underscoring recent reports indicating that US investment into China has continued to increase despite the trade war. US companies identified rising consumer spending in China as the top factor set to benefit them over the next three to five years. Pharmaceutical companies were among the most optimistic as health spending continued to grow.Most also said the business environment had improved, noting a decrease in challenges from government bureaucracy, corruption, and favouritism towards local firms. “Levels of corruption and fraud reported by our members have declined while the government bureaucracy is viewed as more efficient,” said Mr Gibbs.


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