In the midst of escalating tensions between Beijing and the Western world, U.S. corporations are expressing the most pessimistic outlook on conducting business in China seen in decades. A recent survey conducted by the (ACC) American Chamber of Commerce in Shanghai reveals that just over half of the 325 surveyed members are optimistic about their business prospects over the next five years, marking the lowest level since the survey’s inception in 1999. This stark decline is a significant departure from the 78% optimism rate recorded as recently as 2021.
The survey further highlights that while certain sectors such as pharmaceuticals, legal services, and retail exhibit marginally higher levels of optimism, industries like logistics, technology, and management consulting are grappling with decreased confidence. This decline in confidence can be attributed to various factors, including China’s stringent measures against due-diligence firms, as outlined in the annual survey.
The worsening economic downturn in China is negatively impacting the prospects of major U.S. corporations deeply entrenched in the country. Among these companies, a growing sense of pessimism is taking hold, casting doubts on the much-anticipated post-pandemic economic resurgence in China.
In a position paper published on Tuesday, the European Union Chamber of Commerce in China expressed similar sentiments, echoing the concerns of its extensive membership of over 1,700 companies. The group highlighted worries about China’s anti-espionage regulations and data security laws, among other pressing challenges.
The Chinese government has affirmed its dedication to safeguarding the legal rights and interests of foreign enterprises while fostering a conducive investment climate for foreign investments within China. It emphasizes that all foreign companies, in compliance with Chinese laws and regulations, maintain complete autonomy in their business activities.
Simultaneously, China has been intensifying its requirements regarding data security for foreign firms and taking strict measures against companies involved in corporate due diligence.
In July, the Beijing branch of the U.S.-based due diligence firm Mintz Group was fined approximately $1.5 million by Beijing authorities. The penalty was imposed on the grounds of alleged unauthorized statistical work, and this action followed the detention of company staff members earlier in the year.
According to sources cited in The Wall Street Journal this month, China issued a directive instructing officials in central government agencies to refrain from using Apple’s iPhones and other foreign-branded devices for work purposes or bringing them into their offices.
The European Union Chamber of Commerce in China, in a paper based on input and analysis conducted from January through August, stated that European companies had long benefited from investing in China’s rapidly growing and stable business environment. However, recent turbulent years have led many to reconsider their assumptions about the Chinese market.
One major concern cited in the paper is the inconsistency of China’s policy environment, with uncertainty surrounding anti-espionage laws, confusion over data-security regulations, and the government’s suspension of economic data releases. The boundaries of what is permitted and prohibited are becoming increasingly unclear. The chamber’s president, Jens Eskelund, also mentioned instances of social media censorship on Chinese platforms, though the reasons behind it remain unclear.
Furthermore, the paper highlighted that the number of Europeans in China has declined significantly in recent years, partly due to China’s zero-Covid policies and heightened tensions with the U.S. Eskelund noted a shift in China’s policy emphasis towards self-reliance, marking a departure from the era of foreign direct investment-driven growth that benefited both China and foreign companies in the past.
(Source: Newley Purnell | WSJ)
