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Home / Business / American companies say China's slowdown is a bigger threat than the trade war

American companies say China's slowdown is a bigger threat than the trade war



SHANGHAI – American companies are slowing in China as the economy slows and trade with the US continues. This emerges from a new poll highlighting lower revenues, lower investment and job losses. The American Chamber of Commerce in Shanghai showed that 51% of the surveyed members of the business lobby said US and Chinese tariffs had impacted revenues. However, Amcham members pointed to the related problem of China's economic slowdown, which is clouding its prospects.

For years, US companies in Shanghai have been consistently optimistic about the opportunities in China, and Amcham's concerns are mainly reflecting the challenges of the crisis against the fast-growing market, including strong local competition and rising costs. The group has approximately 3,000 members and represents approximately 1

,500 companies, including Thermo Fisher Scientific Inc., Walt Disney Co., FedEx Corp., Duke University, Citigroup Inc. and Wells Fargo & Co.

. More than three-quarters of 333 Respondents to this year's survey said they had remained profitable in China last year, but only forecasted half the revenue growth for 2019, up from 81% in 2018 and similar rates in recent years fell sharply. A solid majority – 61% – also spoke positively about the business outlook in China over the next five years. In recent years, however, this value was routinely 80% or higher. Now, 21% express utter pessimism about the five-year outlook, a figure that has not touched 10% in the recent past.

"This has to do with uncertainty. The business basically does not like insecurity, "said Ker Gibbs, president of the chamber.

The results are in line with a US-China Business Council survey last month that China's optimism is at a historic low. Only a small majority of companies expect their sales in the country to increase next year.

A slowing Chinese economy is viewed by nearly 58% of respondents as the biggest challenge over the next three to five-thirds of respondents a year earlier. According to Amcham, 18% of the surveyed members intend to cut Chinese investment this year, three times as many as those who announced last year to do so. Fifty-three percent of respondents indicated that tariffs lead to slower or lower investment spending, while 20 percent plan to reduce the number of employees. They reject the application of tariffs by President Trump, as members would prefer to engage more intensively with China. More than two-thirds gave a thumbs-up to the China International Import Expo, the initiative launched by President Xi Jinping to expand business opportunities for overseas companies.

The Chinese consumer market continues to attract US companies. However, more and more of them are placing less emphasis on sourcing and production in China, reflecting concerns among technology companies in particular that they may become trade-fair targets, Amcham officials said. "Fears of the Chinese government, non-tariff barriers such as an increased review of legislation or being included in the list of likely unreliable companies could explain the decline, as well as possible tariffs," concludes the report. Beijing has threatened to blacklist American companies that it considers harmful to Chinese companies after the US took similar action against Chinese Huawei Technologies Co.

Manufacturers are looking for alternative locations such as Southeast Asia to manufacture or buy products. Over the last few weeks, executives from Home Depot Inc., Best Buy Co. and Urban Outfitters Inc. have told investors that their suppliers are working to source products outside of China to avoid tariffs. "We hear it from the brands. We hear it from customers in China. So it's very visible, very visible, "said Ronen Samuel, Managing Director of Kornit Digital Ltd., an Israeli manufacturer of textiles printing machinery based in the United States, in a recent conference call.

The Number The number of members taking part in the June to July Amcham poll decreased by almost a quarter from the previous years to 333. Some have stated that they find it uncomfortable to answer questions pertaining to the increasing politicization of the Washington-Beijing conflict. In the survey, 66% of members said the trade would last at least a year, including 17% who predicted that it would continue indefinitely.

Write to James T. Areddy at james.areddy@wsj.com

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