(Bloomberg) — U.S. businesses in China are hesitant about increasing investment due to rising regulatory uncertainties, pessimism over market access and economic growth concerns, according to a survey by the American Chamber of Commerce.
Some 40% of the 353 respondents saw the regulatory environment as one of the driving factors of pessimism over doing business in China, up 16 percentage points from a year ago, according to a report released Tuesday. More than a third said they will lower investment due to policy uncertainties.
“In terms of regulatory uncertainties, it’s the technology and R&D (research & development) intensive industries that are feeling that the most,” Alan Beebe, president of AmCham China, said at a briefing Tuesday.
China’s dual circulation strategy and the call for greater self-sufficiency means it’s “working to invest further in technology and having industrial policies that would put companies at a relative disadvantage over time,” Beebe said. Ambiguity around the “common prosperity” goal also resulted in confusion among firms over how policies may affect them, he said.
Beijing carried out sweeping regulatory crackdown on sectors from education to internet platforms last year, in an effort to address monopolistic practices, narrow the nations’ wealth gap and make economic growth more sustainable in the long run. The slew of actions triggered a sharp sell-off in Chinese stocks in 2021. The campaign has taken a breather since late last year as growth concerns have mounted.
Rising tensions between China and the U.S. remain a top concern for the companies. The respondents’ outlook on U.S.-China relations was less rosy for 2022, with 24% expecting ties to deteriorate, up from 19%. This could show initial optimism that followed U.S. President Joe Biden’s appointment — and hopes for an improvement in bilateral relations — has faded over time with many Trump-era policies remaining, Beebe said.
More than 80% of the surveyed companies said increasing the transparency, predictability and fairness of the regulatory environment would encourage more investment, while 65% recommended limiting the use of industrial policies that create barriers.
Less than half of the companies surveyed were confident in the government’s commitment to further open the market to foreign investment in the coming three years, down from 61% in the previous year, according to the survey, which was conducted between October and November 2021.
Profitability of the American firms rebounded from a year ago but still hasn’t fully recovered to pre-pandemic levels, according to the survey. Those optimistic about domestic market growth in the next two years declined to 64%, from 75% a year ago.
Other highlights:
- Some 42% of the respondents said they planned to increase investment by 1% to 10%, while 29% said they had no expansion plans
- One third of respondents said China’s regulatory actions are causing concern at their global headquarters
- Technology companies are worried about the impact of the Cybersecurity Law’s implementation, and over 80% of them believe the latest data localization requirements will impact them negatively
- Some 15% of the surveyed companies plan to reduce investment if travel restrictions don’t improve within the next six months
(Updates with additional details throughout)
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