Although “nobody can replace” China in the near future, growing uncertainty coupled with competition from neighboring countries is causing foreign companies to reassess operations in the world’s second largest economy, says the president of the American Chamber of Commerce in China.
“People do fundamentally think China is an important market to be in, but there are reservations,” Michael Hart said in an interview with the South China Morning Post.
“Markets like Vietnam have certainly become more interesting. People are reinforcing and modifying their supply chains. The moves are not necessarily anti-China measures, but definitely a way to protect themselves.”
Hart said foreign companies in China have entered a “quiet period” while they either wait for signals the country will reopen, or face reluctance from head offices about expanding.
Business confidence in China is at all-time lows, with rising geopolitical tension threatening key industries and stringent Covid-19 measures battering the economy.
In an August survey by the US-China Business Council, 96 per cent of respondents said they saw negative effects from Covid controls on their businesses, including halted investment, lost profit, and disrupted supply chains.
Decoupling between the world’s two largest economies is complicating matters further, as both countries move to shore up production in sensitive industries like semiconductors and biotech.
“National security signals from both sides on some level are putting extra scrutiny on dual-use technology,” Hart said, referring to technology that has both civilian and military application.
“Many US companies have invested heavily in China. They’ve hired thousands of Chinese scientists and engineers.”
China’s economy is in the midst of an unprecedented economic slowdown. Its second quarter growth plummeted to just 0.4 per cent as a property market slump and zero-Covid measures dampened consumer confidence.
(South China Morning Post)
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