U.S. Companies Rethink China Investment Over COVID Concerns – Business Group Survey

WASHINGTON (Reuters) – China’s strict COVID-19 control measures have overtaken U.S.-China relations as the top concern for U.S. businesses in the country, a business lobby said on Monday.

He said more than half of his companies have flagged the issue as a reason to cancel or delay investments in the world’s second-largest economy.

“The looming possibility that businesses will again be forced to partially halt operations due to shutdowns and the impacts of local controls on consumer demand have undermined confidence in the business environment,” the US-China said. Business Council (USCBC) based on an annual survey. of 117 member companies.

China’s economy narrowly avoided contracting in the second quarter as widespread shutdowns and a slump in the real estate sector severely hurt consumer and business confidence.

Risks still abound as many Chinese cities, including manufacturing hubs and popular tourist sites, imposed lockdown measures in July after new outbreaks of the more transmissible Omicron variant of the coronavirus were discovered.

Most businesses surveyed said the negative effects of Beijing’s COVID measures were reversible, but 44% said it would take “years to restore business confidence,” the USCBC said.

These policies, continued US-China tensions and “significant market access barriers” in China despite government assurances of equal treatment of foreign companies, have led to “record highs.” of pessimism,” affecting companies’ decisions about supply chains and future investments, the group says.

Over the past year, 24% of companies have moved parts of their supply chains out of China, up from 14% in the 2021 survey. Optimism in the five-year business outlook for China is from 88% in 2013 to 51% in 2022.

Still, “companies remain overwhelmingly profitable in China,” the USCBC said, with 63% of respondents saying profitability had increased over the past year.

COVID travel restrictions, cybersecurity rules, cost increases and technology decoupling between the United States and China were also major concerns.

(Reporting by Michael Martina and David Lawder; Editing Tomasz Janowski)

Copyright 2022 Thomson Reuters.

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