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Business trends

Sentiment of US business executives in China wavers: survey

President of American chamber says companies are not abandoning the huge market

Despite deteriorating business conditions, 61% of executives surveyed by the American Chamber of Commerce in Shanghai are optimistic about the next five years.   © Reuters

SHANGHAI -- Business sentiment among U.S. executives in China is at a low point, weighed down by the country's slowing economic growth as well as Sino-American trade friction, a big U.S. business organization said on Wednesday.

According to the American Chamber of Commerce in Shanghai, 61% of executives who took part in a survey said they are optimistic about their business's China fortunes over next five years, down from 80% last year and the lowest reading since 2015.

The survey was taken in June and July as more companies were deciding to move out of China to escape the reciprocal tariffs that the U.S. and China are lobbing at each other.

Some 333 industrial manufacturers, consultancies, retailers and other businesses took part in the survey, which is taken annually.

A majority of the respondents said they remain committed to producing or sourcing goods in China for the local market, with nearly 60% citing increased consumption as the biggest factor. Even so, nearly half of the companies surveyed expected the trade war to drag on for the next five years.

"The uncertainties [stem from] the difficulty to see into the future what kind of environment they will face," said Ker Gibbs, the chamber's president.

In the survey, 50% of the responding companies predicted revenue growth for 2019, down from 81% last year. This is reflective of the trade dispute and of China's economic growth losing steam. In the second quarter, the pace of growth declined to 6.2%, its slowest in 27 years, due to lower manufacturing output.

While most companies said they expect to increase their investments for the rest of the year, those saying they will invest the same amount as or less than last year came to 52%, up from 38% in the previous survey.

The survey report says the technology sector's investment levels have softened the most, which mirrors a trend in which companies are retreating from research ventures in China.

The trade war escalated sharply on Sept. 1, when both countries implemented punitive import tariffs on the other, affecting some $185 billion worth of smartphones, soybeans and other goods.

Slightly over a quarter of the respondents said they have decided to leave China this year due to the deterioration of Sino-American trade relations. As for where they intend to relocate, these respondents said they favor Southeast Asia and India due to these lands' relatively deep skilled labor pools and pro-business environments.

Despite the growing pessimism that this year's survey uncovered, "this is not a market that American companies are prepared to abandon at all," Gibbs, the chamber's president, said.

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