US companies unlikely to heed Trump’s call to leave China

US companies unlikely to heed Trump’s call to leave China

US companies are unlikely to heed Donald Trump’s call to ditch their investments in China despite a tougher business environment in the country and the escalating trade war between Washington and Beijing, the leader of a prominent lobby group for US multinationals said on Thursday. 

“Our members are in China for the long term. None of them are anticipating orders to leave,” Craig Allen, the head of the US-China Business Council, told reporters in Washington. “We want to make this bilateral relationship strong and healthy from a commercial sense and encourage the two sides to get back to the negotiating table.”

Mr Allen’s remarks came amid hopes that a phone call between senior US and Chinese officials on Thursday could pave the way for a resumption of face-to-face talks to ease tensions between the world’s two largest economies as early as next month.

Since the last round of negotiations in Shanghai floundered in late July, the US has moved to impose higher tariffs on nearly all Chinese imports over the course of the next few months, and Chinese has vowed to retaliate against some US products. The US also labelled China a “currency manipulator”, adding fuel to the economic conflict. 

Mr Allen said the US-China trade war was having a substantial impact on American companies with business in the Asian nation, mainly serving the Chinese market. In its annual survey of members, 49 per cent reported lost sales, resulting in a loss of market share to foreign competitors — with 40 per cent saying that US companies were viewed as “unreliable” — a seven fold increase compared with 2018.

The survey also revealed widespread concerns about discrimination against US companies operating in China to the benefit of domestic competitors, through means ranging from tax policies and subsidies to regulatory approvals and restrictions on data flows. Among the more recent examples is a plan to impose a “social credit” system on companies that could serve as a tool to target US companies. 

But Mr Allen dismissed fears of a rapid decoupling of the two economies and an imminent exodus from the Chinese market, even though some supply chains were moving out of the country. Ninety-seven per cent of respondents to the survey said their operations in China were profitable.

“We don’t see a great deal of evidence that our members are leaving China at all — rather investments in China are healthy,” he said. “Most American companies that are there understand that China will remain one of the primary engines of global growth for the foreseeable future.”

Last Friday, Mr Trump said he was prepared to use emergency powers to force US companies to cut ties with China, alarming many in the US business community. But Mr Allen said he believed the US president was simply using the threat as leverage, “to encourage opening and reform of the Chinese market” with no desire “to harm American companies that are actively and successfully doing business in China”. 

In an interview with Fox News Radio on Thursday, Mr Trump said he believed China would eventually agree to a deal because it was already “losing thousands of companies that are leaving China” and their “chain is being broken”. But he accused Beijing of playing a “vicious game” by retaliating against the US farm sector, a hotbed of support for the US president. 

Each time there is a deterioration in the trade war that has spooked markets, Mr Trump has sought to stress that negotiations had not broken off entirely — a point he made again on Thursday. “We have been talking, we continue to talk,” he said. 

One complicating factor in the negotiations has been the crisis in Hong Kong. Mr Allen said his member companies had close ties to Hong Kong, and many had offices there, but the USCBC was not offering them any particular advice. Rather, his group was watching for a “resolution” of the dispute, and encouraged Hong Kong to “listen” to its people and “react to their legitimate concerns”.

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