US firms ‘more negative’ about doing business in China – BBC News

Last year, the number of companies citing “uncertainty in bilateral relations” as their main challenge in China rose by 10 percentage points to 66%. At the same time, the number of companies that think China is less welcoming to foreign companies also increased to 49%.

Five years ago, then U.S. President Donald Trump started a trade war and imposed tariffs on $60 billion of Chinese goods, citing “unfair trade practices” including intellectual property theft and trade deficits.

China followed through on its promise and retaliated with additional tariffs.

AmCham China’s members include some of America’s most successful companies, including Nike, Intel, Pfizer, and Coca-Cola.

In December 1978, when then-leader Deng Xiaoping announced the opening to the outside world, Coca-Cola became the first American consumer company to sell its products in communist China. Since then, trade has been at the heart of the relationship between the two countries.

Michael He said that the pessimism of American companies on the current US-China relationship reflects the turbulence of the past few years.

“Businesses are really tired after three years of COVID,” he added. He also highlighted a number of other issues, including travel becoming more difficult, rising labor costs, executives’ reluctance to accept assignments to China, political pressure and China becoming more unpredictable for doing business.

Despite these difficulties, trade between the two countries hit a record high of $690.6 billion last year, the data showed.

Eswar Prasad, a professor of global trade policy at Cornell University and former head of the IMF’s China division, argues that this interdependence has important implications for the health of the global economy. .

“The reality is that China does need a lot of products, especially technology products from the United States, and the United States does have a lot of companies whose supply chains involve China,” he said.

“This is important for the global economy because these two countries are not only critical to supply chains. The tone of global trade is also set by the relationship between these two countries.”

The World Trade Organization (WTO) was supposed to harmonize that tone by upholding global trade rules.

In December, however, the Biden administration strongly rejected two WTO rulings in favor of China involving tariffs imposed by former President Trump as part of his trade war. The U.S. says the tariffs are imposed on national security grounds and the WTO has no authority to rule on them.

Overall, 66.4 percent of U.S. imports from China and 58.3 percent of Chinese imports from the U.S. are still subject to tariffs, with little sign that either side will reduce tariffs, according to the Peterson Institute for International Economics.

“The way the U.S. is handling its relationship with China could lead to a deterioration of the rules-based global trading system that the U.S. and China have agreed to,” Professor Prasad said.

“If the U.S. starts withdrawing from its engagement with multilateral institutions, it does not bode well for global governance,” he added.

Deteriorating U.S.-China relations also mean more and more U.S. companies are considering shifting supply chains outside of China. Apple, which has become one of the most profitable companies in the world by making a lot of its iPhones in China, is now increasingly making them in countries like India.

However, Wang Dan, chief economist at Hang Seng Bank (China) in Shanghai, said this would have limited impact on resolving Sino-U.S. tensions.

“Even if the U.S. succeeds in creating an alternative supply chain, this alternative supply chain will still rely heavily on China,” she said.

Wang Dan explained that other countries will still rely on Chinese components, especially in industries such as green energy, medical technology and electronics.

While U.S. companies haven’t shunned China entirely, He said, “they’re trying to reduce their supply chain risk.” “So they’re doing more of a ‘China+1’ strategy, they realize they can’t rely on China anymore,” he added.

China’s economic growth slowed to 3% last year as COVID-19 restrictions hit business activity. At the recent National People’s Congress of China, the new Premier Li Qiang said that now that these measures have been lifted, the target of 5% growth for this year is still not easy to achieve.

“Beijing still wants U.S. companies to invest in China, and I don’t think this attitude will change in the short term,” Wang Dan said.

He added that the huge Chinese consumer market may still be the “most optimistic” place for American companies. Companies such as McDonald’s, Starbucks and Ralph Lauren all have major expansion plans in the works in China.

Yet all of this is happening against a backdrop of national security concerns in both countries, mostly centered around technology.

National security concerns have led the Biden administration to take increasing steps to try to block China’s access to U.S. technology, including trying to limit new investments in China by U.S. semiconductor makers.

Both countries are working to increase support for technologies that authorities deem critical to the future of the global economy.

“I’ve made it clear to President Xi that we seek competition, not conflict,” President Biden said in his State of the Union address last month.

“I make no apologies for our investment in making America stronger. Investing in American innovation, investing in industries that will define the future and that the Chinese government intends to dominate.”

However, this approach is not popular in Beijing. President Xi Jinping recently said, “Western countries led by the United States have implemented all-round containment, containment, and suppression of China, which has brought unprecedented severe challenges to my country’s development.”

This contest is increasingly affecting individual companies and spreading around the world.

Germany is the latest country to consider taking action as Chinese telecommunications giant Huawei has already been restricted in several countries due to US pressure. Meanwhile, social media platform Tiktok has been threatened with a blanket ban in the US and is also facing restrictions in the UK.

Prof Prasad said all this friction between the US and China meant “tensions are definitely running high” and the costs could go well beyond the US and China.

“Escalating animosity between the world‘s two largest economies, which together account for about 40 percent of global GDP, risks creating more volatility and uncertainty, the last thing an already fragile world economy needs right now. stuff,” he said.