In Spite of Difficulties Reinvestment Plans in China Remain Strong

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The American Chamber of Commerce in South China

Mar 18, 2020, 02:17 ET

GUANGZHOU, China, March 18, 2020 /PRNewswire/ -- The American Chamber of Commerce in South China (AmCham South China) today released the results of its latest three studies, the Special Report on the Impact of COVID-19 Outbreak on the Supply Chain, the 2020 White Paper on the Business Environment in China, and the 2020 Special Report on the State of Business in South China.

2020 White Paper on Business Environment in China, 2020 Special Report on the State of Business in South China & Special Report on the Impact of COVID-19 on Supply Chain Release Conference

The 521-page 2020 White Paper, now in its 12^th year, a six-month effort, represents a highly-researched, exhaustively-cited account of the on-the-ground business environment in China. The 2020 Special Report on the State of Business in South China, now in its 16^th year involving a study conducted from October 15, 2019 to Jan 15, 2020 meanwhile, aggregates and analyzes the experiences of the companies who participated in the Chamber's annual State of Business study.

The Special Report on the Impact of COVID-19 Outbreak on the Supply Chain provides the results of the study of 237 companies, conducted from March 9-14, 2020. American companies make up just over half while Europe, China and other APEC countries represent the remaining participants. Multinational companies make up nearly half of the companies in the study and manufacturers represent 76% of the total.

The 2020 White Paper and the 2020 Special Report on the State of Business in South China provide the following key points:

"In China, for China" is still the primary strategy for most foreign companies operating in China.
Although approximately one fifth of surveyed companies reduced their headcounts to various degrees in 2019, most of the respondents seem to be confident in increasing headcounts in 2020.
Relatively stable revenue, profitability, and return on investment in China were maintained by most of the studied companies. While in 2019 more US companies witnessed decline in revenues from China than their counterparts, their profitability was better than the others. For those not yet profitable, the estimated length of time for reaching profitability was slightly longer than previous years.
US companies providing consumption products and services remain positive and maintain high optimism in China's market growth.
China is considered as one of the top three investment destinations in the world by more than half of surveyed companies, even though its attractiveness as the top global investment destination and manufacturing base has decreased slightly.
Steady year-on-year growth of reinvestment in China was seen in 2019. Studied companies with reinvestment budgets of less than US$50 million in 2019 realized their reinvestment in China as planned. In addition more than one fourth of US companies reinvested more than US$50 million each in 2019 to expand operations.
Willingness to reinvest in China is expected to remain strong in the next three years. 68% of companies plan to reinvest in 2020.
Guangzhou has once again been rated as the top spot of reinvestment destination in China handily beating Beijing, Shanghai and Shenzhen.
Business environment in South China showed a steady rising trend.
Fierce local competition and rising operating costs were reported as constant challenges for studied foreign companies operating in South China.
Most of the studied companies were optimistic about the Greater Bay Area Action Plan, however there was a slight reduction in companies considering Ten Measures for Attracting Foreign Investment and the intellectual property court usefulness.
Optimism towards US-China trade relations was low in this research. Even after the first phase of Trade Agreement was signed, an overwhelming majority believe the dispute was likely to escalate in 2020. Compare with their Chinese counterpart, more US companies reported that they had been hurt in the trade tension, particularly reflected by their lost market share.

Companies participating in the Special Report on the Impact of COVID-19 Outbreak on the Supply Chain included companies from US, Europe, China and other APEC countries. Following are some key findings of the study:

32% of the companies in the study are facing shortages with 15% of those already out of some components, supplies or material.
89% of those impacted believe problems will last between one to three months while 11% predict six months or longer.
100% of respondents report experiencing varying levels of impact on their operations due to disruptions in the supply chain.
Companies report shortage problems caused by logistics and delivery issues in China are being resolved quite rapidly. However, they believe shortage of supplies from US, Europe and APEC (other than mainland China) will continue to worsen.
While one multinational reports to have postponed its product release, others feel they may have to follow suit affecting tens of thousands of employees globally.
With 18% of the shortage of components, supplies or material involving US, Europe, and APEC countries (other than mainland China), job losses in those countries as a result of disruption in the supply chain will be substantial.

'It will require a coordinated international series of actions to minimize the impact of disruption in the supply chain. Today's events prove we need each other as no one country can do it alone," said Harley Seyedin, President of the American Chamber of Commerce in South China.

About White Paper on the Business Environment in China and Special Report on the State of Business in South China

The White Paper on the Business Environment in China offers a summary of China's impressive accomplishments since China's opening-up and examines the key influences on the business environment in present-day China, such as national policy initiatives and global economic crisis.

The Special Report on the State of Business in South China is a quantitative study of the business environment, conducted for consecutive years by AmCham South China. Each year, AmCham's member and non-member companies participate in AmCham's State of Business study, results of which will be garnered and edited into a separate publication.

Both documents may be downloaded free of charge from the Chamber's website at www.amcham-southchina.org/amcham/static/publications/publications.jsp.

About The American Chamber of Commerce in South China

The American Chamber of Commerce in South China (AmCham South China) is a non-partisan, non-profit organization dedicated to facilitating bilateral trade between the United States and the People's Republic of China. Certified in 1995 by the US Chamber of Commerce in Washington DC, AmCham South China represents more than 2,300 corporate and individual members, is governed by a fully-independent Board of Governors elected from its membership, and provides dynamic, on-the-ground support for American and International companies doing business in South China. In 2018, AmCham South China hosted more than 10,000 business executives and government leaders from around the world at its briefings, seminars, committee meetings and social gatherings. The American Chamber of Commerce in South China is a fully-independent organization accredited by the US Chamber of Commerce in Washington, D.C. All AmChams in China are independently governed and represent member companies in their respective regions.

SOURCE The American Chamber of Commerce in South China