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Chinese and US flags flutter near the Bund, before the US trade delegation meets their Chinese counterparts for talks in Shanghai, China on July 30, 2019.
Aly Song | Reuters
BEIJING — A record number of U.S. companies in China are accelerating their plans to relocate manufacturing or sourcing, according to a business survey released Thursday.
About 30% of respondents have considered or started such diversification in 2024, surpassing the previous high of 24% in 2022, according to annual surveys by the American Chamber of Commerce in China.
It also exceeded the 23% share reported for 2017, when the president of the United States Donald Trump began his first term and began raising tariffs on Chinese goods.
In addition to US-China tensions, “one of the biggest impacts we’ve seen in the last five years was Covid and how China is closing itself off from the world because of Covid”, Michael Hart, president of AmCham China, based in Beijing. , he told reporters on Thursday.
“It was one of the biggest triggers as people realized they needed to diversify their supply chains,” he said. “I don’t see the trend slowing down.”
China has restricted international travel and locked down parts of the country during the Covid-19 pandemic in an attempt to limit the spread of the disease.
While India and Southeast Asian countries remain the most popular destination for manufacturing relocations, the survey showed that 18% of respondents plan to relocate to the United States in 2024, from 16% last year.
Most American companies have no plans to diversify. Just over two-thirds, or 67%, of respondents said they did not plan to relocate manufacturing, a drop of 10 percentage points by 2023, the survey showed.
AmCham China’s latest survey covered 368 members from October 21 to November 15. Trump was re-elected president of the United States on November 5.
Trump this week affirmed plans to increase tariffs on Chinese products by 10%and said the duties could come as soon as February 1. This follows an increasingly tough stance by the US on China. The Biden administration has emphasized that the United States is competing with China and has issued broad restrictions on the ability of Chinese companies to access cutting-edge US technology.
More than 60% of respondents said US-China tensions were the biggest challenge to doing business in China in the coming year. Competition from local state-owned companies or private Chinese companieswas the second biggest challenge for US companies operating in China, according to the survey.
Slower economic growth
Adding to geopolitical pressures, growth in the world’s second-largest economy has slowed, with consumer spending muted by the pandemic. Chinese authorities at the end of September began to step up efforts to stimulate growth and curb the real estate fall.
For a third consecutive year, more than half of AmCham China respondents said they did not make a profit in the country, adding that the region had become less competitive in terms of margins versus other global markets.
The proportion of companies no longer listing China as a preferred investment destination has risen to 21%, doubling from pre-pandemic levels, the survey said.
Looking ahead, however, technology, industrial and consumer companies said they saw domestic consumption growth as the top business opportunity for 2025, the survey said. Service companies said their first opportunity was Chinese companies looking to expand overseas.
Hart noted that many members are still optimistic about Chinese consumers as a “large and important market.”
