U.S. firms rethink China investment on COVID concerns-business group survey

WASHINGTON (Reuters) – Strict COVID-19 management measures in China have overtaken bitter U.S.-China relations as the highest concern of U.S. corporations within the nation, a enterprise foyer mentioned on Monday.

It mentioned greater than half of its companies reported the difficulty as a purpose to cancel or delay investments on this planet’s second largest economic system.

“The looming chance that corporations will once more be compelled to partially halt operations because of lockdowns and the impacts of native controls on client demand have undermined confidence within the enterprise setting,” the U.S.-China Enterprise Council (USCBC) mentioned primarily based on an annual survey of 117 member corporations.

China’s economic system narrowly prevented contracting within the second quarter as widespread lockdowns and the slumping property sector badly broken client and enterprise confidence.

Dangers nonetheless abound as many Chinese language cities, together with manufacturing hubs and in style vacationer spots, imposed lockdown measures in July after contemporary outbreaks of the extra transmissible Omicron variant of the coronavirus had been discovered.

A lot of the corporations surveyed mentioned unfavourable results of Beijing’s COVID measures had been reversible, however 44% mentioned it could “take years to revive enterprise confidence,” USCBC mentioned.

These insurance policies, persevering with U.S.-China tensions, and “important market entry limitations” in China regardless of authorities assurances of equal remedy of overseas corporations, have led to “document ranges of pessimism,” affecting corporations’ selections about provide chains and future investments, the group mentioned.

Prior to now 12 months, 24% of corporations have moved components of their provide chains out of China, in comparison with 14% within the 2021 survey. Optimism in five-year enterprise outlook for China has dropped from 88% in 2013 to 51% in 2022.

Nonetheless “corporations overwhelmingly stay worthwhile in China,” USCBC mentioned, with 63% of respondents saying profitability elevated within the final 12 months.

COVID journey restrictions, cybersecurity guidelines, price will increase, and U.S.-China expertise decoupling had been additionally main considerations.

(Reporting by Michael Martina and David Lawder; Enhancing Tomasz Janowski)