Chinese and American flags fly near the Bund, before the US trade delegation meets its Chinese counterparts for talks in Shanghai, China, July 30, 2019.
Ali Song | Reuters
BEIJING — A record percentage of U.S. companies in China are accelerating their plans to move manufacturing or sourcing, according to a trade 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.
This percentage also exceeded the 23% recorded in 2017, when he was president of the United States Donald Trump He began his first term and began raising tariffs on Chinese goods.
In addition to US-China tensions, “one of the major impacts that we've seen in the last five years has been Covid and how China has closed itself off from the world because of Covid,” said Michael Hart, the Beijing-based president of the American Chamber of Commerce in Beijing. He told reporters Thursday.
“That was one of the biggest catalysts as people realized they needed to diversify their supply chains,” he said. “I don't see this trend slowing down.”
China has restricted international travel and locked down parts of the country during the COVID-19 pandemic in an attempt to restrict the spread of the disease.
While India and Southeast Asian countries remained the most popular destination for relocating production, the survey showed that 18% of respondents are considering moving to the United States in 2024, up from 16% the previous year.
The majority of American companies did not plan to diversify. Just over two-thirds of respondents, or 67%, said they were not considering relocating manufacturing, a 10 percentage point decline from 2023, the survey showed.
The latest survey conducted by the American Chamber of Commerce in China included 368 members from October 21 to November 15. Trump was re-elected as President of the United States on November 5.
Trump confirmed this week Plans to increase customs duties on Chinese goods by 10%He said the fees could come on February 1. This comes after an increasingly tough US stance towards China. The Biden administration has stressed that the United States is in competition with China and issued sweeping restrictions on Chinese companies' ability to access cutting-edge American technology.
More than 60% of respondents said that tensions between the United States and China were the biggest challenge for doing business in China in the next year. According to the survey, competition from local state-owned enterprises or privately owned Chinese companies was the second biggest challenge for American companies operating in China.
Slowing economic growth
In addition to geopolitical pressures, growth has slowed in the world's second-largest economy, with consumer spending declining since the outbreak of the pandemic. In late September, the Chinese authorities began intensifying efforts to stimulate growth and stop the real estate stagnation.
For the third year in a row, more than half of the participants in the American Chamber of Commerce in China said they had not made profits in the country, adding that the region had become less competitive in terms of margins versus other global markets.
The survey stated that the percentage of companies that no longer list China as a preferred investment destination has risen to 21%, doubling from pre-pandemic levels.
However, looking ahead, technology, industrial and consumer companies said they view domestic consumption growth as the biggest business opportunity for 2025, the survey said. Service companies said their biggest opportunity is Chinese companies looking to expand abroad.
Hart noted that many members remain optimistic about Chinese consumers as a “large and important market.”
