Optimism among American firms in China has reached a record low as “the impact of ongoing COVID-related restrictions is negatively impacting business confidence and leading to lower investment.”

According to a survey from the American Chamber of Commerce in Shanghai released on Friday, October 28, the number of companies describing themselves as optimistic about the five-year business outlook dropped to 55%. The figure reached the lowest level in the survey’s history, down 23% from 2021.  

In addition, 52% of the companies said that their headquarters’ business confidence in China’s economic management deteriorated in the past year. Only 18% of them ranked China as top place in their company’s global investment plans, down from 27% in 2021.

The survey noted, “One-third of respondents have redirected planned China investments to other destinations in the past year, almost double the number of companies that did so in 2021.”

In terms of earning performance, the outlook for the China market is dim for American firms as nearly half of the companies (47%) forecast their yearly revenue growth in 2022, down 29% from 2021, and the lowest expectation in at least 10 years. And 75% of companies reported profits in 2021, significantly below rates from the past several years.

Companies in the survey considered domestic competition their top challenge for the next five years in China. Other factors include the U.S.-China tensions, economic slowdown, and COVID restrictions.

Sean Stein, chairman of China’s Amcham, said, “What keeps a lot of businesses up at night is competition and rising competition from Chinese competitors.” 

Beijing’s strict Covid measures remain the main concern for domestic and foreign companies in China. During last week’s CCP national congress, Chinese leader Xi Jinping showed no signs of easing policy, prompting a global sell-off in Chinese stocks. 

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