US firms sour on their future in China as trade war bites: AmCham

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SHANGHAI: The US China trade war is souring the profit and investment outlook for US companies operating in the world's second-biggest economy, a report by a prominent American business association showed on Wednesday (Sep 11).

The annual poll by the American Chamber of Commerce in Shanghai found that while most of its member companies remained profitable in 2018, the number reporting revenue growth fell. Projections for future revenue also dropped, highlighting the corrosive impact of the escalating tit-for-tat tariffs.

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Five-year optimism sunk for the first time since 2015, when China's stock markets nosedived and the authorities fumbled their response.

"Revenue growth projections have lowered, optimism about the future has waned, and many companies are redirecting investment originally planned for China," AmCham said in its report on the survey published on Wednesday.

READ: Trump hardens tone on China as trade war rattles economy

The downbeat results come as US and Chinese negotiators prepare to meet in Washington in October in stop-start efforts to de-escalate the year-long trade row. With little progress to show so far, market expectations for a breakthrough in the discussions are low.

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"With no sign of a trade agreement, 2019 will be a difficult year. Without a trade deal, 2020 may be worse," the AmCham report said.

Most AmCham member companies were against the use of tariffs to handle trade disputes, with three-quarters of respondents saying they were opposed.

The survey was conducted between Jun 27 and Jul 25 – before the latest round of tariff increases took effect – and received 333 responses, AmCham said.

READ: China's exports fall in August as US trade war rumbles

More than a quarter of poll respondents said they had redirected investments originally planned for China to other locations – up 6.9 percentage points from the previous year. Southeast Asia was the top destination, followed by India.

Investment redirection was most prominent in technology, hardware, software and services, with 40 per cent saying they had done so, according to the survey.

Moreover, decreases in investment have accelerated in 2019, underscoring the pressure on China's economy, which grew at its slowest pace in almost 30 years in the seco