US companies in China see record-low profits amid geopolitical tensions

Beijing and Washington have been at odds in recent years over issues like trade and manufacturing, as well as China’s claims over the South China Sea.

China is also grappling with a slowing domestic economy, with lackluster consumer demand and deflationary pressures persisting even post-Covid.

The geopolitical tensions between both countries was the top challenge to businesses’ operations in China, the report found.

It’s a balance between risk and reward, said Eric Zheng, president of AmCham Shanghai, during a news conference ahead of the report’s publication.

The perceived risks of doing business in China have gone up in the past few years, but at the same time the market is slowing down, with soft demand and overcapacity, he said.

Many businesses are now redirecting investments to other regions such as Vietnam, Malaysia and South Asia, Zheng said.

A record high of 25 per cent of companies polled cut investment in China in 2023, AmCham’s report found, largely driven by concerns over China’s slowing growth.

While just over half of US companies expect their revenue to increase over last year, only 37 per cent are expecting growth in China to outpace global growth in the coming three to five years.

The AmCham report came a day after the European Union Chamber of Commerce in China published a report with similar sentiments on the increasing risks of doing business in China. The report highlighted a lack of implementation on promised reforms and an increasingly politicised business environment.

The European Chamber’s report found that for some European companies, the risks of investing in China were beginning to outweigh the returns.

We are concerned about there being a tipping point now, and therefore we have a call for action to the Chinese government to turn the tide, said Jens Eskelund, the European Chamber’s president, at a news conference on Wednesday.

First Published: Sep 12 2024 | 4:44 PM IST