American companies in China increasingly worry U.S.-Chinese relations will deteriorate and are “hedging their bets” by delaying investments or moving operations, a business group reported Tuesday.
The report by the American Chamber of Commerce in China sounded a note of caution amid optimistic official statements about possible progress toward settling a U.S.-Chinese tariff war.
Companies ranked “bilateral tensions” as a top challenge alongside chronic frustrations with rising costs and vague laws and enforcement in the state-dominated economy, the chamber said.
Some 37 percent of 314 companies that responded to a survey in November and December expect relations to deteriorate, more than double 2017’s level of 16 percent, the chamber said. Another 37 percent expect relations to stay at their current fraught level.
The report added to signs of the growing long-term impact of the battle over Beijing’s technology ambitions.
President Donald Trump announced he would postpone a March 1 deadline for another tariff hike on Chinese imports after the two governments reported “substantial progress” in weekend talks. Both Trump acknowledged many of their disputes were too complex to be resolved soon.
In a report written ahead of Sunday’s announcement, the chamber cautioned tensions are “increasingly driven by fundamental differences” between the two economic systems.
“A growing number of companies are hedging their bets,” the report said. It said nearly one-quarter of those surveyed were postponing investments or moving supply their supply chains to avoid the impact of possible tariff increases.
China is a “high priority” for most companies but many “appear to be tempering their investment plans,” the report said. It said they cite stronger competition from Chinese rivals, rising costs and pressure on profits.
UBS reported in January that 37 percent of 200 manufacturers surveyed by the bank have shifted out of China over the past 12 months. The threat of U.S. tariff hikes was the “dominating factor” for nearly half, while others moved because of higher costs or tighter environmental regulation.
The American chamber’s European counterpart has reported similar unease among its members and reluctance to invest.
“Survey results suggest that we are yet to see the full impact of the tariffs,” said the American chamber report.
Companies also cited frustration with Chinese market restrictions and regulation.
Three-quarters of companies in technology and other research-based industries said market restrictions hamper their operations, the chamber said. It almost half of companies surveyed believe Chinese policies are enforced differently against foreign and domestic competitors.