US Business Sentiment in China at Record Low, Survey Shows

US companies in China are losing faith in the country’s business prospects amid regulatory challenges and stresses from the zero-Covid policy.

An annual survey by the American Chamber of Commerce in Shanghai and consultancy PwC China found that just 55% of 307 companies felt optimistic about the five-year business outlook.

The reading is the lowest in the survey’s 23-year history – worse than in 2020, when Covid-19 first surfaced, and during the trade standoff between Beijing and Washington in 2019.

And about half of the companies said that their headquarters’ confidence in China’s economic management had fallen in the past year.

Only 18% ranked China as number one in their company’s global investment plans, down from 27% last year.

The respondents surveyed between July 14 and August 18 cited domestic competition as their top challenge for the next five years, followed by US-Chinese tensions, the economic slowdown and Covid-related travel curbs and lockdowns.

“What keeps a lot of businesses up at night is competition and rising competition from Chinese competitors,” Sean Stein, chairman of the chamber told a news conference.

He added that in the past chief rivals may have been state-backed Chinese rivals, but private digital players were increasingly dominant in the local market.

Beijing is exhorting its key industries to become more self sufficient especially as tensions with the United States grow over China‘s policy towards Taiwan, its relationship with Russia and, more recently, US efforts to block the transfer of semiconductor technology to Chinese companies.

In addition, while many countries have eased coronavirus restrictions, China has continued to fight its spread with lockdowns, mass testing and quarantines, which has hit economic growth and caused significant disruption to businesses.

Stein said relaxing Covid policies would “absolutely” increase optimism, as travel curbs have “thinned the pipeline” of projects that overseas executives could help manage in-person, but warned that alone could not bring sentiment back to the past highs.

Still, the survey found that only 53 firms, or 17%, indicated that they were considering leaving in the next one to three years, as the market’s vast size, skilled talent pool, and robust supply chain made most businesses committed to China despite the challenges.