Finance

American companies increasingly look outside of China after Covid

Parts of Shanghai have faced intermittent restrictions on business due to Covid controls, even after a broader two-month lockdown ended in June.
Vcg | Visual China Group | Getty Images

BEIJING — Nearly twice as many U.S. companies cut their investment in China this year versus last year, the American Chamber of Commerce in Shanghai found in its latest survey, released Friday.

For 2022, 19% of respondents said they were cutting investment in China, up from 10% in 2021, the report said.

The top reasons for doing so were Covid-related shutdowns, travel restrictions and supply chain disruptions, survey respondents said.

“Confidence has been shaken,” the American Chamber of Commerce in Shanghai said.

The metropolis of Shanghai suffered one of the harshest lockdowns in China earlier this year, dragging down the national economy in the second quarter with barely any growth. A bounce of 3.9% in the third quarter brought year-to-date GDP growth to 3% — well below the official target of around 5.5%.

The International Monetary Fund expects China’s economy will pickup from 3.2% growth this year to 4.4% next year, while that of the U.S. will slow from 1.6% this year to 1% next year.

China’s growth potential was the top reason why 30% of respondents said they were increasing investment in the country, the AmCham Shanghai survey found. But that figure was down from 38% last year.

Looking to Southeast Asia

One-third of respondents redirected planned China investments to other destinations in the past year, the survey found.

That’s nearly twice the number last year, the report said, noting Southeast Asia was the most popular destination, followed by the U.S.

Southeast Asia attracted the majority of redirected investment, especially in tech, logistics and retail, the survey found.

The survey had 307 respondents between July 14 and Aug. 18, before the latest U.S. export controls on the semiconductor industry.

Over the next one to three years, one retail member said it was moving all production out of China, along with one manufacturing company, the report showed. In all, the survey showed nine firms moved more than 30% of their manufacturing capacity out of China.

The vast majority of companies in the chemicals, pharmaceutical, medical devices and life sciences industries planned to keep operations in China, the report said.

Still relying on China

Beijing has emphasized it wants the country to focus more on higher-end manufacturing, while factories in more labor-intensive industries have been moving to other countries where wages are lower.

But China remains a critical supplier for more U.S. and EU goods than the other way around, according to an Allianz Research report this month.

“This means that, in an extreme scenario where US-China and US-EU-China trade relations are completely cut off, the US and Europe have more to lose,” the report said. “The loss of critical supplies would cost 1.3% of GDP for the US and 0.5% of GDP for the EU, but 0.3% of GDP for China.”

Products You May Like

Articles You May Like

Delta pilots would get more than 30% in pay raises under new contract deal
The Home Improvement Projects Spring Sellers Should Tackle Now (And What To Skip)
Who Would Benefit From A Lame Duck Child Credit And Business Tax Bill?
What’s Missing From This Real Estate Contract?
iPod creator Tony Fadell designed a $279 credit card-sized device for storing your crypto

Leave a Reply

Your email address will not be published. Required fields are marked *