About a fifth of US companies in China are considering moving some or all of their production out of the country to deal with the trade tensions, and a third are delaying or cancelling investment decisions, according to a survey of 239 American firms in the market.
Almost 40 per cent of companies said the hike of US tariffs announced on May 10 would have a strong negative impact on their business, and a third said the increase in Chinese levies would do the same. The report provides evidence of a decoupling of the two nations’ economies, with 35 per cent of firms saying their main strategy for dealing with the tension was to restructure so their operations were more heavily ‘in China for China.’
So far, the effect of the trade dispute has mostly been financial, with companies seeing decreased demand, rising costs and falling profits and revenues, according to the survey done May 16-20 by the American Chamber of Commerce in China and the American Chamber of Commerce in Shanghai. There had been concerns that US firms would face non-tariff retaliatory measures in China, but 53 per cent of the companies said they had not experienced any such measures in the 10 months since July 1, 2018.
US firms reported greater damage from the trade war than their counterparts in the European Union. Only a few of the European firms are considering moving their supply chains, they said in a recent survey.
Another issue touched upon by the American Chambers’ survey was that whether China forces foreign companies to transfer technology and intellectual property to Chinese firms to gain market access. China denies that this happens, but it has been one of the main sticking points in the negotiations.
At least for the firms surveyed for the report, it doesn’t seem to be such an issue, with only one saying that this was the most important outcome in any trade deal. About 42 per cent said a return to the status quo before the tariffs was most important for them.
The report on European firms doing business in China showed that forced technology transfer was a growing concern, with 20 per cent of respondents saying they’d had to hand over know-how in order to maintain market access. That compares to only 10 per cent in 2017.
Of the firms who have moved or are considering relocating manufacturing facilities outside China, the most popular destination wasn’t the US but rather emerging markets such as Southeast Asia and Mexico.