Bilateral relations, anti-China rhetoric weigh on Chinese businesses in the US

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By GT staff reporters

A newly-released survey by a Chinese business community in the US has presented a dismal picture of Chinese companies operating in the US, where companies are becoming more concerned on how to navigate through unchartered water amid deteriorating bilateral relations between the world’s two largest economies and rising anti-China rhetoric.

With Washington intensifying efforts to crack down against Beijing, growing uncertainties have prompted some Chinese businesses to considerer reducing and holding off investment in the US, or even shifting to other markets as a result – a decoupling trend which industry observers said could weigh on US economy and gradually weaken the competitiveness of US companies.

About 74 percent of the Chinese companies said that the complex China-US relations top the most difficult challenges in conducting business in the US in 2020, almost staying the same as that of 2019, according to a survey the China General Chamber of Commerce – USA (CGCCUSA) sent to the Global Times on Friday.

The survey is titled Annual Business Survey on Chinese Enterprises in the US, which reflects on the US business environment and challenges encountered while Chinese businesses operating in the US.

The concern, which had topped the list of difficulties in recent years under former Trump administration, shows no sign of a turning point under Biden administration which labels China as a “strategic competitor.” According to the survey, most companies hold conservative views on the forecast of China-US relations, citing fraying relations as the biggest impediment to their future investment plan in the US.

As part of the ongoing effort to restrict China’s rise, the US House of Representatives Foreign Affairs Committee has scheduled a meeting next Wednesday to consider sweeping legislation to boost economic competitiveness and push Beijing on human rights, the Strait Times reported on Thursday.

What’s noteworthy in the survey is that 43 percent of the Chinese companies reported cultural conflicts, including anti-Asia/China sentiment and operation management styles, are emerging as their second-biggest concern in 2020. In 2019 before the US hyped the coronavirus origin issue, the ratio only stood at 28 percent.

Also, the tariff war continues to weigh on the operation of Chinese businesses in the US in 2020, inflating their cost on importing finished products and sourcing from upstream supplies. The survey showed that some 78 percent of respondents reported being negatively impacted and others expect long-term implications.

While some investors remain indifference to trade relations, they took note of the Committee on Foreign Investment in the United States (CFIUS) which screens foreign investment, criticizing the organizations as “politicized and opaque.” And nearly one-third of survey respondents said that it will have an adverse impact on their investment plans in the US.

Taken together, these difficulties are leading to an atmosphere that would further deter Chinese investment, and analysts said in the long-term, the trend will drive up inflation in the US and make US consumers suffer from higher spending on daily necessities.

The survey showed that 52 percent of the respondents said that uncertainty in the policy environment could lead to their reduced investment in the US. In light of the trade disruption that poses threat to supply chain management, 30 percent of respondents impacted by the decline in trade relations said they will delay or cancel future investment in the US, and 44 percent intend to increase investment in other regions, including Asia, Europe and South America.

Tian Yun, vice director of the Beijing Economic Operation Association, told the Global Times on Friday that it is likely that the decoupling streak would accelerate in the high-tech sector, as the Biden administration is doubling down efforts to build a “China-free” high-tech supply chain.

“Washington could further mobilize political power to squeeze Chinese high-tech firms out of the US market. Also, tech cooperation with US companies could face more hurdles than ever,” Tian said, while suggesting Chinese companies speed up diversification efforts.

Some analysts said that the US’ hostile policy environment will ultimately make Chinese firms strong within the international sphere, as they’re reducing expenditures, controlling costs, and improving their competitiveness to cope with difficulties. Whereas in the US side, local companies are protected well at home and may gradually lose their competitive edge.

Global Times

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