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Chinese and U.S. flags wave near the Bund before the U.S. trade delegation meets its Chinese counterparts for talks in Shanghai, China, July 30, 2019.
Aly Song | Reuters
BEIJING – A record share of American companies in China are accelerating plans to relocate manufacturing or supply, according to a business survey released Thursday.
About 30% of respondents considered or started such diversification in 2024, surpassing the previous high of 24% in 2022, according to the American Chamber of Commerce in China’s annual survey.
That also exceeded the 23% share reported for 2017, when he was US president Donald Trump began his first term and began raising tariffs on Chinese goods.
In addition to US-China tensions, “one of the main influences we’ve seen in the last five years was Covid and how China closed off from the world because of Covid,” said Michael Hart, president of AmCham China in Beijing. , he told reporters on Thursday.
“That was one of the biggest triggers, because people realized they needed to diversify their supply chains,” he said. “I don’t see that trend slowing down.”
China restricted international travel and locked down parts of the country in an attempt to limit the spread of the disease during the Covid-19 pandemic.
Although India and Southeast Asian countries remained the most popular destinations for manufacturing relocation, the survey showed that 18% of respondents considered relocating to the US in 2024, up 16% from the previous year.
Most US companies had no intention of diversifying. More than two-thirds of respondents, or 67 percent, said they were not considering relocating manufacturing, a 10-point drop from 2023, the survey showed.
The latest AmCham China survey had 368 members between October 21st and November 15th. Trump was re-elected president of the United States on November 5.
Trump confirmed this week He plans to raise tariffs on Chinese goods by 10%and said the duties could come as soon as February 1. This follows the increasingly tough US stance on China. The Biden administration emphasized that the US is in competition with China and imposed severe restrictions on the ability of Chinese companies to access advanced US technology.
More than 60% of respondents said that tensions between the US and China were the biggest challenge to doing business in China in the coming year. Competition from local state-owned or privately owned Chinese companies was the second biggest challenge for US companies operating in China, according to the survey.
Slower economic growth
Adding to geopolitical pressures, growth in the world’s second-largest economy has slowed, with consumer spending muted since the pandemic. Chinese authorities began stepping up efforts in late September to stimulate growth and stem the real estate slump.
For the third consecutive year, more than half of AmCham China respondents said they did not make a profit in the country, adding that the region has become more competitive in terms of margins compared to other global markets.
The proportion of companies not listing China as a preferred investment destination rose to 21%, doubling from pre-pandemic levels, the survey said.
Looking ahead, however, technology, industrial and consumer companies said they see domestic consumption growth as their top business opportunity by 2025, the survey says. Service companies said their main target was Chinese companies looking to expand overseas.
Hart noted that many members are still optimistic about Chinese consumers “as a big and important market.”
