Chinese companies fear less welcoming U.S. business environment

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Chinese companies doing business in the United States share an "apparent" fear that the U.S. business environment will become "less welcoming" as the trade frictions with China intensify, said a survey released Monday by a China-U.S. business group.

In its 2019 Annual Business Survey Report, the China General Chamber of Commerce-USA (CGCC) said that increasingly protectionist policies in the United States have resulted in a trade war and has led to declining investments from China.

The fear that the trade war creates a less-welcoming business environment for Chinese companies is apparent, said CGCC Chairman Chen Xu. "This environment's uncertainty shakes our members' confidence and discourages them from making further investments in the U.S."

In the name of protecting domestic industries, Washington has placed steep tariffs on billions of U.S. dollars' worth of products from China, a heavy blow to the two countries' economic and trade relations.

VCG Photo

According to the New York-based group, Chinese foreign direct investment (FDI) in the United States, whose "exponential growth" started in 2013 and peaked in 2016 and 2017, "dropped drastically" in 2018 and early 2019.

So far this year, Chinese FDI in the United States declined by 90 percent from its highest level in 2016, the report said.

Companies with a 2018 annual revenue of less than 5 million U.S. dollars make the biggest chunk, or 43 percent, of all that responded to the survey, while those whose revenue surpassed 100 million dollars accounted for 21 percent.

The top three sectors among the companies responding to the survey cover industrial, energy and financial sectors, the report showed.

Some 47 percent of the companies said their revenue in 2018 remained the same in comparison with 2017, 20 percent saw an increase by less than 20 percent, and 7 percent suffered losses of more than 20 percent.

The report also showed that challenges shared widely by Chinese companies in the United States include barriers on employment-based visas and immigration program, escalating protectionism in the United States, slow U.S. economic growth, and unstable U.S. policy toward foreign investment, among others.

Among all policy-related obstacles, tariffs on Chinese products topped the list of concerns, the report said, with 77 percent of the companies stating that they had been adversely impacted by these policies.

The result coincides with a survey with Chinese CEOs by PricewaterhouseCoopers (PwC), which showed that regulatory compliance challenge is the second overall concern after trade policy issues, the report said.

As enthusiasm for developing the high-tech industry grows in China, a new challenge for Chinese companies in the United States involves "complying with emerging and often inconsistent data sovereignty and privacy laws," it added.

Citing the PwC's survey, the report said 84 percent of the respondents expect artificial intelligence to have a bigger impact on their businesses than the Internet. "As a result, data sovereignty laws can feel like tariffs that increase the cost of doing business and slow down innovation."

2019 Annual Business Survey Report. /CGCC Photo

As to how the U.S. business environment has changed last year compared to two years ago, 52 percent of the companies said it has declined, more than doubling the 23 percent who said so in the 2018 survey.

Looking into the future, 30 percent of the participants anticipate that the U.S. business environment will "moderately decline" in the next two years, and another 3 percent expect a drastic deterioration in the period, whereas only 12 percent said so in 2018, the report said.

Some 84 percent of respondents said the uncertainty in the policy environment is the main reason they could see reducing investments in the United States.

Some 45 percent of the respondents said they will delay investment in the United States until it reaches an agreement with China to solve the trade disputes, while 38 percent said they intend to adjust their global supply chain to avoid the additional tariffs Washington has imposed.

Since 2005, CGCC members have invested over 120 billion dollars in the United States, and employed "an estimated 200,000 people" in the country, said Chen.

"Their investments here translate into substantial job creation and economic growth," Chen said.

Source(s): Xinhua News Agency