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Automobiles

US automakers in China plan layoffs despite rebound in sales

Move comes amid growing political tensions and global economic uncertainty

Traffic jams quickly returned to Beijing after lockdown. Automobile sales in China grew 16.4% in July from a year earlier.   © Reuters

SHANGHAI -- U.S. automotive companies with operations in China plan to trim staff count and shift some production abroad this year in response to the drawn-out trade tensions between the two countries, according to an American business group's survey released on Wednesday.

The planned moves come despite a rebound in automobile sales in China, fueled by state subsidies and pent-up demand following the country's relative success in containing the coronavirus pandemic.

The companies' plans reflect growing uncertainties felt by businesses across the board amid growing friction between Beijing and major economies around the world, and about the sustainability of China's economic recovery.

"The U.S.-China tension is leading to difficulty in retaining staff," Ker Gibbs, the president of the American Chamber of Commerce in Shanghai, which issued the report, said at a news conference. "The Beijing-Washington dialogue has to work this out [as] it is having an impact on business performance here."

AmCham Shanghai's report said that 43.4% of respondents from the automotive industry said they planned to cut staff. A total of 346 U.S. companies, of which 23 were from the automotive industry, took part in the survey between June 16 and July 16.

As with the automotive respondents, nearly one-third of those who joined the survey said they are considering similar measures to cut costs due to the slowing global economy.

Some 17% of automotive companies are planning to move part of their production out of China, while nearly a third are cutting investment in response to trade tensions and tariff increases.

"Given that COVID-19 and the tariffs have underscored the potential risk of an overexposed supply chain, the small but not insignificant exodus of auto manufacturing was not unexpected," the report said.

This comes despite China's rebound in passenger car sales. Total sales rose 16.4% in July compared with the same month a year before.

Automotive executives' plans to decouple from China reflects risk mitigation rather than calls by U.S. President Donald Trump to do so, as 70.6% of total respondents said their companies will remain in the country.

Even so, the escalating trade tensions that have spilled over to include bans on technology companies and the expulsion of journalists by both countries have weighed on investment decisions by American companies in China.

Only 28.6% said they intend to invest more in China this year, compared with 47.2% last year, as more of the respondents now expect the tensions to continue indefinitely.

"Among the most pessimistic industries were technology, hardware, software and services, and pharmaceuticals," the report said. "The prospect of a dual-technology ecosystem is unsurprisingly worrying for those in the broader information technology industry."

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