American Companies Are 0ptimistic About Businesses in China

By Lily Wang

According to the 2021 China Busi- ness Report issued by the American Chamber of Commerce in Shanghai and PwC （China）， nearly 60% of surveyed member companies of the American Chamber of Commerce in Shanghai said that their investment in China of 2021 is higher than that of 2020， up by about 30%. Also， about 77.1% surveyed companies saw net profits in 2020.

No large-scale shift of production line/supply chain

This survey received feedback from corporate representatives from 338 member companies of the American Chamber of Commerce in Shanghai. The survey covers a series of topics including sales revenue， business prospects， investment plans， operation challenges， human resources and economic and trade policies.

The report showed that about 59.5% of surveyed companies predict that their investment in China in 2021 will be higher than that of 2020， up by 30.9%； about 77.1% of companies saw net profits in 2020， almost the same with the previous years； 82.2% of companies said their revenue would increase in 2021 compared with last year； 69.7% of companies predict that in the next 3-5 years， their business growth in China would outperform other markets of the world.

After the outbreak of the COVID-19 pandemic last year， it was forecast that U.S. enterprises in China would redirect their production line / supply chain to other foreign locations. However， the report does not confirm this statement. Of the 125 U.S. manufacturing companies surveyed by the report， 72% have no plans to redirect any production capacity out of China in the next three years. Among the remaining 28% of companies that do have plans to transfer production capacities， only two companies （accounting for 1.6%） intend to transfer all their production activities in the next three years. The survey also showed that no companies plan to transfer its production activities back to the United States.

Ker Gibbs， President of the American Chamber of Commerce in Shanghai， said，“Chinas business environment has seen quick recovery as the pandemic was under control last year. However， the impact from the pandemic still persists. For example， some of the surveyed companies are bothered by the limitations of cross-border travel. But generally speaking， our member companies have excellent business performance in China.”

However， Ker Gibbs said that the impact from the pandemic spread will continue， with surveyed companies expected to continue to see trouble with limitations on cross-border travel.

Investment in China shows increasing trend

Despite the uncertainties of the global pandemic， companies surveyed plan to increase their investment in China. About 59.5% of surveyed companies said that their investment in 2021 would be higher than 2020， up by 30.9%，almost 62% of the investment of 2018.

The report shows that surveyed companies continue to deem China as the key market in their global investment plan. About 26.9% of surveyed companies said that China will be their top destination for global investment， up by 2.3%； about 42.5% of retailers said the Chinese market is their most important destination for investment， almost double that of 2020 （19.5%）. Regarding segmented industries， the industries most favored by global investors are the pharmaceutical， medical facility and life science industries （about 30.4% of companies regard China as top investment destination， up by 11.4% from last year）.

Of all the companies intend to increase investment in China， about 81.7% of companies said they mainly focus on the growth potential of the Chinese market. About 69.7% of surveyed companies said that in the next 3-5 years， their business revenue growth in China would outperform other markets of the world.

Other factors that make companies decide to increase investment in China include： Chinas professional personnel reserve （25%） and available low-cost and highly efficient supply chain （21.4%）. Companies from medical health （33.3%）， food and agriculture （36.4%）， bank， finance and insurance （25.9%） and other sectors also mentioned“invest or purchase start-up companies” when talking about increasing investment in China.

Jeff Yuan， Transfer Pricing National Services Leader for PwC China and Hong Kong， said that many American companies and multinational companies in China have been increasing investment in digital technology and are competing in related fields. Meanwhile， companies of retail， TMT and high-tech industries are focusing on their ESG （environment， social responsibility and corporate governance） strategies.

The report shows that the percentage of companies increasing investment in digital technology due to the COVID-19 pandemic in 2021 （69.8%） is larger than last year （56.1%）. Sectors that see more than 80% of companies increasing such investment include： food and agriculture （90.9%）， medical health （83.3%） and logistics， transportation， storage and retail（83.3%）. In sectors where the total investment increase is low， companies deciding to invest in digital technology still account for a large share， such as manufacturing （67.1%）， management consulting （66.7%） and real estate， engineering and construction services （61.5%）.

In addition， 43.8% of surveyed companies regard “brand positioning targeting international consumers” as the major driving forces of promoting ESG. As environmental protection policies become more of a priority for the government， and favorable policies to support green economy are put in place， about 37.8% of surveyed companies regard “supervision requirements” as amajor driving force for ESG.

Jeff Yuan said， “for American companies that are optimistic about their business development in China， the formulation of a comprehensive and reasonable China strategy is their top mission. As the investment is expected to increase in 2021， we also predict that more and more companies will invest in retail and digital technology， to win the favor of Chinese consumers.”

Further tap the Chinese market

Recently， Gregory Gilligan， President of the American Chamber of Commerce in China， said that member companies of the American Chamber of Commerce in China are confident about the development of the Chinese market. This is also reflected in the China Business Report. In the past 5 years， about 60% of member companies said that China is one of their top 3 investment destinations in the world； in the past 5 years， about 80% of member companies said they would not redirect their production or procurement to other foreign locations.

The world economy is facing tremendous challenges as the COVID-19 pandemic is continuing to spread around the world. The American Chamber of Commerce in China conducted a quick survey about the impact of the pandemic on the business environment last March. Gregory Gilligan said that 81% of surveyed companies thought that small and medium-sized companies have contributed about half of the annual revenue. Also， about 36% of surveyed companies said that about 1/4 of their supply chain partners are small and medium-sized companies. Therefore， “foreign companies in China are inter-dependent with Chinas small and medium-sized companies. Such connection has become much closer due to the impact from the pandemic，” said Gregory Gilligan.

Gregory Gilligan also indicated that the American Chamber of Commerce would play arole as a bridge to promote bilateral trade and economic relations. It will leverage resources from multinational companies to share best practice and engage in projects to promote development of Chinas SMEs and business exchanges between Chinese and American companies.