WASHINGTON – China’s zero-Covid-19 policy was the top concern last year for American companies in the country, and their optimism about the world’s second largest economy has fallen to a record low, according to an annual survey out on Monday (Aug 29).
Beijing’s pandemic policy also displaced tensions between the United States and China to become the American firms’ chief worry for the first time in five years.
More than half of the 117 respondents in the US-China Business Council’s survey said they had paused, delayed or axed their investment plans in China as a result of its strict containment strategy.
“The looming possibility that companies will again be forced to partially halt operations due to lockdowns and the impacts of local controls on consumer demand have undermined confidence in the business environment,” said the business council’s president Craig Allen at a press conference.
He added that the lockdowns had forced US companies to shut down for months, created significant uncertainties for businesses, and prevented many US executives from visiting their China operations for several years.
Even if China changes course on its Covid-19 policies, 44 per cent of the respondents say restoring business confidence will take years.
The survey was conducted in June this year, shortly after a period of widespread lockdowns in response to Covid-19 cases across China, most notably in Shanghai.
Businesses also reported record levels of pessimism, citing geopolitical tensions as the top issue affecting their gloomy five-year business outlooks.
Some 21 per cent of respondents say they have a pessimistic outlook, more than double last year’s figure of 9 per cent. While nearly 90 per cent of businesses surveyed were optimistic a decade ago, just over 50 per cent are now.
Mr Allen said this pessimism was “affecting companies’ decisions about their supply, chains and future investments”.
Over the past 12 months, 24 per cent of respondents have shifted parts of their supply chains out of China, compared to 14 per cent in the previous year.
However, the majority of 78 per cent have kept their supply chains in China, a testament to “the country’s competitiveness in speed, quantity, quality, and cost of manufacturing, despite lockdowns and tariffs”, the survey report noted.
It also found that about two-thirds of respondents are in a wait-and-see mode, and are not planning to make any changes to resource commitment over the next year.
“At the same time, companies overwhelmingly remain profitable in China, and they continue to recognise China’s importance to their global competitiveness,” said Mr Allen.