Coronavirus: most US firms in China still struggling with travel disruptions as pandemic fallout continues

01-Jun-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

More than a third of US companies operating in China plan on scaling back investment in the world’s second largest economy in light of the coronavirus pandemic, while nine in 10 are still facing travel disruptions six months after the virus was identified in the city of Wuhan, a survey showed on Friday.

However, rising tensions between the US and China had not caused “a direct negative” effect on American firms, according to the American Chamber of Commerce (AmCham) in China.

Some 37 per cent of businesses said in May they would reduce their planned investments in China, down three percentage points from last month but up from 24 per cent in March, according to the AmCham survey of 109 mostly multinational companies.

About 47 per cent said they may adjust long-term business plans, 11 percentage points higher than in April, while 60 per cent of firms said they had been forced to cut costs, up from 50 per cent last month, the survey said.

So many companies are adopting what we refer to as a China+1 strategy whereby they’ll invest in China to tap into the market opportunities, but at the same time diversify their supply chains

Alan Beebe

“So many companies are adopting what we refer to as a China+1 strategy whereby they’ll invest in China to tap into the market opportunities, but at the same time diversify their supply chains and therefore risk to other parts of the world,” said AmCham China president Alan Beebe.

Beebe said the shift of supply chains out of China has been a long-term trend, though less than 10 per cent of members would return to the United States.

China remained one of the top investment locations for US companies due to the market potential, he added.

Global travel disruptions remain the biggest concern for American companies in China, with 90 per cent of survey respondents saying this was affecting their businesses, a significant jump from 77 per cent last month, the survey showed.

The US government has threatened action against Chinese government for making it hard for American airlines to resume services to China, even as Chinese carriers have continued flights to the US.

Greg Gilligan, chair of AmCham China, said that the association was working with municipal and even district level governments to enable expatriates to return to China. AmCham had also discussed the issue this week with the Chinese vice financial minister Liao Min, who was part of Beijing’s negotiating team for the phase one trade deal.

American business leaders were carefully watching how the US-China relationship developed, AmCham said.

Relations between the two nations have hit new lows in recent months, as the two nations clash over trade, the origins of the pandemic, and Beijing’s moves to impose new security regulations on Hong Kong.

“We certainly wish that both countries appropriately protect national security and law enforcement interests … However, we wish that we keep the commercial lane as broad as possible,” Gilligan said.

“If we feel that things are unnecessarily expensive and then impede the commercial lane unnecessarily, we’ll call those out.”

However, rising tensions between the two nations had had a limited impact on American businesses to date, AmCham said.

“In our interactions and communications with the Chinese government, they delineate between American business and the US government,” Beebe said.

The latest survey showed the coronavirus has had a clearer impact on US companies in China, with 20 per cent of respondents saying they expected revenue from their mainland operations to decrease by 10 per cent to 25 per cent if the pandemic extends through to August 30.

The consumer sector could be particularly hard hit, with 21 per cent of consumer companies predicting revenue from China to shrink by at least a half this year.

However, the US companies still expressed a mixed view on the outlook of the Chinese market.

Eighteen per cent of respondents said they expect to see their China industry market growth decrease by 25-50 per cent, up from the 8 per cent ratio of pessimists in last month.


Category: China

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