The prolonged Covid controls — as mainland China tackles its worst virus outbreak since early 2020 — have further discouraged U.S. businesses from investing in the country, the AmCham survey found.
The percentage of respondents reporting decreased investments as a result of the latest outbreak and restrictions rose to 26% versus 17% a month earlier.
Those reporting a delay in investments fell slightly to 26%, versus 29% in the previous survey. The proportion who said it’s too early to predict or haven’t decided on the impact on investment plans rose to 44% in the latest survey, up from 30% in the prior study.
Official figures show a steady increase in foreign direct investment from all countries into China, up by 31.7% year-on-year in the first quarter to $59.01 billion.
China’s Ministry of Commerce did not have a comment ahead of its regular press conference on Thursday. When asked in late April about foreign businesses’ challenges, the ministry said it would make all effort to ensure resumption of work and production.
“If you want investment you have to allow for travel,” Hart said, noting the impact will be felt in the long term.
“Two, three, four years from now I predict a massive decline in investment in China because no new projects are being teed up, because people can’t come in and look at space,” he said.
If Covid controls persist for the next year, 53% of respondents to AmCham’s latest survey said they would reduce investment in China.
By industry, the tech and research and development businesses reported the highest impact of Covid controls on their investment plans, with 53% of those surveyed in the sector expecting delays or reductions.
On the other hand, consumer businesses were the only ones to report plans to increase investment, albeit just 4% of members in the sector. For the industry, 36% planned to reduce investment, while 29% said they would delay investment as a result of the latest outbreak.
The consumer sector was also the only one to report some increase in yearly revenue projections despite the Covid impact, at 3% of respondents. However, the majority of consumer businesses, or 69%, said they were cutting revenue expectations for the year.
Business hasn’t fully resumed
While Shanghai authorities have announced whitelists that allow just under 2,000 businesses to resume production, AmCham’s latest survey found that among respondents with Shanghai operations, 15% said they had yet to reopen.
That doesn’t mean the majority are fully back at work. Hart said anecdotally, some companies he spoke with last week in Shanghai were operating at 30% to 50% capacity. Many suppliers remain closed, while shipping parts and goods to customers is still challenging, he said.
Several different cities across China have enacted some form of lockdown, and truck drivers often need special passes and frequent negative virus tests in order to transport goods. Part of the difficulty is inconsistent implementation across provinces and cities of what China calls its “dynamic zero-Covid” policy, Hart said.
At the local level, “government officials are looking for practical ways for companies to solve their issues and get back to work, because those people are judged by economic performance,” Hart said. “When we talk to government at [a] high level, it’s not a focus on the economy. It’s a focus on health and Covid reduction.”
“Just based on our own companies’ experience in the U.S. and Europe and other markets, we have seen that other countries have taken a different strategy,” he said. “We’re just asking for a bit more of a balance.”
Last week, Chinese President Xi Jinping led a meeting that emphasized the country should “resolutely fight” against all questioning of virus control policies. The meeting also warned of economic consequences if China didn’t stick to its dynamic zero-Covid policy.
In November, China’s Center for Disease Control and Prevention published a study that warned that shifting to the “coexistence” strategy of other countries would likely result in hundreds of thousands of daily cases — devastating the national medical system.
For Monday, mainland China reported 349 new Covid cases with symptoms and 3,077 without symptoms, mostly in Shanghai — which reported six deaths for the day.
Source: CNBC
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