US firms in China will see ‘no light at the end of the tunnel’ in 2023, business council says
- Douglas Barry, communications and publications vice-president with the US-China Business Council in Washington, expects 2023 to be a very difficult year
- On Thursday, the US Department of Commerce added 36 Chinese firms to its entity list in a move to curb Beijing’s ability to leverage technologies for military use
Political friction, restrictions in the technology sector and an economic slowdown tracking China’s tight coronavirus controls will vex American firms next year even as company executives aim to return and rekindle operations, a US trade group official said.
“Many members say they will send executives once the country opens,” said Douglas Barry, communications and publications vice-president with the 265-member US-China Business Council in Washington.
“[But] 2023 is likely to be a difficult year with little light visible at the end of the tunnel unless it’s a train coming in your direction.”
American multinationals have poured hundreds of billions of dollars into China over the past two decades to capture a piece of the large and increasingly wealthy market. China received US$118.19 billion in US investment last year and US$123.9 billion in 2020.
With the downward slide in the bilateral relationship, businesses had to be extra careful about upsetting their China stakeholders
But tensions between Beijing and Washington have escalated with a litany of disagreements over Taiwan, hi-tech know-how, security and ideology.
“With the downward slide in the bilateral relationship, businesses had to be extra careful about upsetting their China stakeholders, while at the same time absorbing criticism and facing restrictions and tariffs generated in the United States,” Barry told the Post earlier this week.
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The department requires special licences to do business with companies on the list, with the decision seen as a move to curb Beijing’s ability to leverage technologies for military use.
“[Many] companies may be hesitating on future investments because of uncertainty over China’s economic policy,” US ambassador to China Nicholas Burns said in an interview with the Beijing-based American Chamber of Commerce in China earlier this month.
“But my own advice to companies as ambassador is to stay away from investments in China that would assist the growth and development of China’s military industrial sector.
“We don’t want our national security interests diminished and affected by American investments to help the Chinese compete with us in areas that are core to our national security.”
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Producers of certain “high-performance microchips” are already restricted in China, and more could follow, Barry said.
Chinese officials will “closely monitor” certain companies in the coming months and the number of “blacklisted” Chinese firms is likely to expand in the US, he added without specifying which companies would be monitored or blacklisted.
American firms have weathered a lot already, Barry added, with lockdowns and transport barriers proving to be “very hard” during the pandemic.
The Chinese government has tried to help pandemic-hit businesses, he said, but actual aid received has been “spotty” partly because of the multiple layers of decision-making.
Tariffs on some items added more headaches. The so-called closed loop where employees had to sleep at the workplace was especially difficult to navigate
“Companies exporting goods faced port traffic delays and sky-high shipping costs,” Barry said.
“Tariffs on some items added more headaches. The so-called closed loop where employees had to sleep at the workplace was especially difficult to navigate.”
A slowing Chinese economy under virus controls has dimmed the demand for US products, Barry added.
Liu Qing, a national development and strategy professor at Renmin University, told a forum on Thursday that US firms had been trimming positions in China since the 2008 global financial crisis.
The US is “trying to weaken dependence on China”, Liu told the Sino-US Political and Economic Forum.
China, in turn, has lost tax revenue, employment, and demonstration “models”, Liu said.
On Thursday, Chinese Foreign Ministry spokesman Wang Wenbin called Washington a “saboteur of the multilateral trading system” and a “disrupter of global industrial and supply chains and an expert in unilateralism and bullying” when asked about this week’s World Trade Organization review of US trade policy.
Most American executives have found trips to China tough or impossible during the pandemic because of difficulties obtaining visas and following quarantine rules after entering the country, Barry said.
As members of the business council plan to visit China once it opens, the council is planning a trip for some CEOs in late 2023.
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Some multinationals still intend to grow in China, with US coffeehouse chain Starbucks planning to increase its store count to 9,000 by 2025, while retail giant Walmart aims to grow its more than 30 China outlets at least by 2028.
The business council said on Thursday that US exports to China had created more than 1 million jobs for the US in 2021, the first time since 2017.
If China eases border quarantine rules, annual travel from the US will quickly exceed its 2019 total of some 450,000 air tickets at an average fare of US$1,000 because of pent-up demand, said Orestes Fintiklis, vice-chairman of the Mondee, a software and services provider for travel agencies.
Chinese-American families will make up most of that surge, Fintiklis said, but the number of business travellers will rise as well.
Additional reporting by Amanda Lee
