US companies worried about their future in China as trade war worries him: AmCham

SHANGHAI (Reuters) – China-US relations An investigation by a major American business association reveals that the trade war is altering the profit and investment prospects of US companies operating in the world's second-largest economy.

The annual US Chamber of Commerce survey in Shanghai found that while most of its member companies remained profitable in 2018, the number of people reporting revenue growth has fallen. Projections of future revenues have also fallen, highlighting the corrosive effect of higher tit-to-tat rates.

The five-year optimism has fallen for the first time since 2015, when Chinese stock markets fell and the authorities felt their reaction.

"Revenue growth forecasts have come down, optimism about the future has weakened and many companies are reorienting the initially planned investments for China," AmCham said in a report on Published survey on Wednesday.

The disappointing results come as US and Chinese negotiators prepare to meet in Washington in October to put an end to efforts to defuse the year-long trade dispute. With little progress to show up to now, market expectations for moving forward in discussions are weak.

"In the absence of a trade agreement, 2019 will be a difficult year. without a trade agreement, 2020 could be worse, "the AmCham report said.

Most AmCham member companies objected to the use of tariffs to deal with trade disputes, with three-quarters of respondents stating that they oppose them.

The survey was conducted between June 27 and July 25 – before the entry into force of the latest round of tariff increases – and received 333 responses, AmCham said.

More than a quarter of respondents said they had redirected investments initially planned in China to other countries, an increase of 6.9 percentage points over the previous year. Southeast Asia was the first destination, followed by India.

The reorientation of investments was more prominent in technology, hardware, software and services, with 40% of them claiming to have done so, according to the survey.

In addition, investment declines accelerated in 2019, highlighting pressure on the Chinese economy, which has experienced the slowest growth in the past two decades, over the past two decades.

The survey showed a decrease of 14.4 percentage points in the number of companies expecting an increase in investments and a 12.2 percentage point increase in the number of companies planning to reduce their investments compared to 2018.

The gloominess weighed on the job.

Nearly 20% of companies reported having reduced their workforce in 2019, compared with just under 10% last year, while the number of companies reporting an increase in their workforce decreased by 17.8 percentage points. percentage.

In addition to the trade war, the slowdown in the Chinese economy has clouded the outlook and has been designated as the biggest challenge of three to five years by nearly 60% of companies – up 22.5% over last year.

Nevertheless, AmCham said that there were "pockets of optimism" in the results of his investigation, corruption and fraud would have diminished, while the government bureaucracy would have become more efficient and l? improved regulatory environment.