Source: Global Times    Published: 2020-08-12

Despite an unprecedented downturn in US-China relations amid the coronavirus pandemic, American businesses are not leaving the Chinese market, one of the world's largest, a report from the US-China Business Council (USCBC) showed.

Five-year projections from US companies doing business in China are bullish, with nearly 70 percent expressing optimism about the market's prospects and 87 percent saying they have no plans to shift production out of China, the USCBC report said.

It said 83 percent of companies counted China as either the top or among the top five priorities for their global strategy.

Analysts said the survey underlined US companies' firm commitment to the Chinese market, despite fraying ties between the world's two largest economies.

The USCBC is a trade group representing more than 200 businesses including global brands like Apple, Boeing and Qualcomm.

But the report also noted diminishing optimism in the short- to medium-term prospects of the Chinese market, with 25 percent of member companies having reduced or stopped new investment in China.

The foremost reasons cited were increased costs, uncertainties from US-China tensions and uncertainties stemming from the COVID-19 pandemic. Some 86 percent of USCBC members report that bilateral trade tensions, a top concern more troubling than trade war-induced tariffs, affected their business with China.

Zhou Rong, a senior research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China, said that the cooling China-US relationship will to some extent dent US investors' confidence in China operations.

"They will worry whether their business in China will be impacted by new US restrictions, which will put them in an awkward situation in China."

Zhou noted that the negative impact will be grave on high-tech companies, an area where Chinese and US businesses have had frequent interactions. The relationships have been shadowed by the Trump administration's moves to crack down on China's technology companies.

According to Zhou, economic decoupling could mean Chinese companies face a shortage of parts due to a crackdown by the US government, while US technology companies would see losses too.

Due to US' relentless crackdown on Chinese businesses, more than 90 percent of 100,000 Chinese netizens disapprove of the US and support retaliation, according to a Global Times online survey this week.

Gao Lingyun, an expert at the Chinese Academy of Social Sciences in Beijing who closely follows the China-US trade, said the fear of full-scale decoupling runs high, but its genuine impact is yet to be seen.

However, rising uncertainties mean extra costs when a company makes backup plans, Gao said.

"Companies vote with their feet on almost the sole issue of whether they can make money, and the report shows China remains one of the top markets for US companies, despite the headwinds," Gao told the Global Times Wednesday.

However, analysts said that US companies investing in China needn't worry about facing retaliation by the Chinese government amid the political turmoil. "Unlike the US, China is not inclined to transform general political friction into concrete measures against companies," Zhou said.

Some 88 percent of respondents held a positive or somewhat positive view of the phase one trade deal, with companies seeing the fruits of the agreement, particularly market openings, according to the report.

Even among the uncertainty, some US companies are optimistic about the Chinese market.

"We believe the Chinese market will be really promising — after all, this is the world's largest payment market," an insider from Express (Hangzhou) Technology Service Co, a joint venture with American Express, told the Global Times Wednesday.

"Even as the pandemic affects tourism, we see vast potential in other sectors including catering and services," the insider said.

American Express Co became the first foreign card organization to conduct clearing business in China in June as China continued to open up its financial sector.

Raphael Coelho, CEO of Popeyes China, a US-based fried chicken restaurant chain that just opened its first outlet in China, said that based on the company's observation, the Chinese market will flourish in the long term, and business in China will be very "positive" and "reliable" despite temporary disruptions like the epidemic, according to a statement sent by the company to the Global Times.

"I don't think smart foreign investors will give up on the Chinese market," Commerce Minister Zhong Shan said over the weekend, noting that China remains a magnet for foreign investment as its doors open wider and its business environment continues to improve.

The number of projects in China with investment above $100 million hit 320 during the first half of this year, when the pandemic was wreaking havoc on the global economy, showing that the country still holds great appeal to foreign investors, Zhong said.

Zhou Rong is a senior fellow at Chongyang Institute for Financial Studies, Renmin University of China (RDCY).