The share of American companies in China looking to relocate has reached a record high, a survey has found
Chinese and US flags fly near the Bund, before a US trade delegation meets their Chinese counterparts for talks in Shanghai, China, July 30, 2019.
Aly Song | Reuters
BEIJING – A record share of U.S. companies in China are accelerating their plans to relocate production or procurement, according to a business survey released Thursday.
About 30% of respondents were considering or starting such diversification in 2024, surpassing the previous high of 24% in 2022, according to annual surveys by the American Chamber of Commerce in China.
It also surpassed the 23% share recorded for 2017, when he was president of the US Donald Trump began his first term and began raising tariffs on Chinese goods.
Along with US-China tensions, “one of the main influences we’ve seen in the last five years has been Covid and how China has closed itself off from the world because of Covid,” Michael Hart, president of Beijing-based AmCham China. , 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 has restricted international travel and closed parts of the country during the Covid-19 pandemic in an attempt to limit the spread of the disease.
Although India and Southeast Asian countries remain the most popular destination for manufacturing relocations, the survey found that 18% of respondents are considering moving to the US in 2024, up from 16% the previous year.
Most American companies did not plan to diversify. Just over two-thirds, or 67%, of respondents said they were not considering relocating production, a drop of 10 percentage points from 2023, the survey found.
AmCham China’s latest survey covered 368 members from October 21 to November 15. On November 5, Trump was re-elected as the US president.
Trump confirmed this week plans to raise tariffs on Chinese goods by 10 percentand said the tariffs could come in as early as February 1. This follows an increasingly tough US stance towards China. The Biden administration has emphasized that the U.S. is competing with China and has issued sweeping restrictions on Chinese companies’ ability to access cutting-edge U.S. technology.
More than 60% of respondents said that US-China tensions are the biggest challenge for doing business in China in the coming year. Competition from local state-owned or private 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 subdued since the pandemic. At the end of September, Chinese authorities began to step up efforts to stimulate growth and stop 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 less competitive in terms of margins compared to other global markets.
The share of companies no longer citing China as a preferred investment destination rose to 21%, doubling from pre-pandemic levels, the survey found.
However, looking ahead, technology, industrials and consumer goods companies said they see growth in domestic consumption as a major business opportunity for 2025, the survey says. The service companies said their main opportunity is Chinese companies looking to expand overseas.
Hart noted that many members are still optimistic about Chinese consumers as a “big, important market.”
