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U.S. Businesses In China Confident Despite Pandemic And Stagnant Bilateral Relations

BEIJING — American firms are the most confident they have been about their business prospects in China since before a damaging U.S.-China trade war began, according to a survey just released by the American Chamber of Commerce in Shanghai, a strong sign that business between the two countries has improved despite a global coronavirus pandemic and stagnant bilateral relations.

The survey of 338 U.S. companies operating in China found 59.5% of them had actually increased their investments in China over the last year. 82.2% of companies predicted they would achieve revenue growth for the full year this year, a pace that has not been matched since 2018, the year before the U.S. and China began putting retaliatory tariffs on each other's exports.

"The tenor is optimism,"said Jeffrey Lehman, the chair of the board of governors of the American Chamber in Shanghai. "People are hopeful that things will get better, but they are waiting and seeing."

The positive findings are at odds with the tense political relationship between the U.S. and China, with the two countries clashing over cybersecurity, technological standards, human rights, and trade. President Joe Biden is now pushing the U.S. and its allies to confront and contain China's growing political and economic clout.

"China has to start to act more responsibly in terms of international norms on human rights and transparency," Biden said this past June after a G7 meeting. "Transparency matters across the board."

Despite this heated political rhetoric between the U.S. and China, the American Chamber in Shanghai said the negative impact of a worsening relationship fell unevenly on members.

"Fifty percent [of U.S. companies] are producing goods and services that are sold here in China – the majority is in China, for China. That means we shouldn't be surprised by the relative stability," said Lehman.

Covid travel restrictions have also significantly boosted American luxury retail sales in China because no one can travel internationally anymore, says Jeff Yuan of PricewaterhouseCoopers, which helped compile the report. Low Covid infection numbers allowed the Chinese economy to open up sooner than in other countries, including in the U.S., and leading to better performance among American firms in China than globally, said Yuan.

A nose dive in U.S.-China relations three years ago and rising Chinese labor costs prompted some American firms to explore setting up offices and production facilities in Southeast Asia. But an exodus of foreign companies out of China has not materialized, even as Covid lockdowns in Chinese shipping ports temporarily clogged up exports.

"Speculation that some U.S. companies might move production or supply chains out of China in the aftermath of Covid proved unfounded," the chamber wrote in its report. The chamber said of its 125 surveyed companies who manufacture in China, 72% had no plans to shift any production out of China in the next three years.

American companies still face hurdles in China. They are struggling to bring in new employees and their families into mainland China, which still maintains strict closures of its international borders for epidemic control reasons.

Chinese regulators have also unleashed a barrage of regulation on the country's media, education, technology, video gaming, and property sectors in a multipronged effort to bring down debt levels, introduce greater Communist Party control over cultural production, and tamp down social inequality.

Ker Gibbs, the chamber's president, expressed cautious optimism about the future of American business in China but warned this wave of Chinese regulation could "narrow the space in which companies can operate," again.

Copyright 2021 NPR. To see more, visit https://www.npr.org.

Emily Feng is NPR's Beijing correspondent.

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