AmCham China Business Climate Survey 2024: Key Takeaways

AmCham’s annual survey on the business environment in China reveals a nuanced view of the business landscape in the country, highlighting its improved financial performance and appeal as a top investment destination. Yet, challenges persist, including concerns over US-China relations and perceived unequal treatment of foreign companies. Most importantly, the survey highlights the need for continued dialogue and efforts to address regulatory uncertainties and market access issues, all of which will foster a conducive environment for sustainable business growth and collaboration.

The American Chamber of Commerce (AmCham) in China has released its annual Business Climate Survey Report on February 1, 2024. The survey findings offer a comprehensive overview of the current state of business sentiment and investment outlook in China. Released amid evolving geopolitical dynamics and economic shifts, the report sheds light on both the opportunities and challenges faced by foreign companies operating in the Chinese market.

China remains a crucial market for numerous American businesses, offering a wellspring of talent and innovation that bolsters the global competitiveness of American companies. Furthermore, American businesses’ engagement in China not only fosters stronger US-China ties but also fuels the economies of both nations, extending beyond mere trade statistics and profit margins.

Despite geopolitical tensions and regulatory uncertainties, the survey indicates a cautiously optimistic outlook among American businesses regarding their operations and investments in China. However, it also highlights the imperative to tackle critical challenges to maintain this positive momentum and cultivate a favorable environment for foreign investors.

In this article, we delve into the key findings of the survey and explore the factors shaping the business landscape in China according to American firms.

Survey insights

The survey included participants from diverse industries and enterprises of varying sizes, many of which have a global presence. To facilitate data analysis, respondents were classified into four main sectors:

• Technology and other R&D-intensive Industries (Tech and R&D);
• Resources and Industrial (R&I);
• Consumer (products and services); and
• Services.

Conducted between October 19 and November 10, 2023, the survey drew insights from a total sample size of 343 respondents.

Improved financial performance

The survey reveals an improved financial outlook, driven by relaxed pandemic restrictions and increased high-level governmental engagements. Projections for 2023 revenues show a modest yet significant increase, particularly in the Consumer and Services sectors.

Notably, 49 percent of respondents anticipate profitability in 2023, up by 5 percent from the previous year. Additionally, about one-third of members foresee enhanced operating margins (EBIT) compared to 2022.

China reclaims its position as a leading global investment destination

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The vast majority of respondents who rank China among their top 3 global investment priorities see modest improvement, as compared to that in 2022. Fifty percent of survey participants now rank China as their first choice or within their top three investment destinations globally, marking a 5 percent increase from last year’s lowest point.

It’s worth mentioning that this 50 percent includes 12 percent of the Chamber members exclusively operating in China, providing a more comprehensive understanding of the investment scenario.

Impact of US-China relations: A more positive outlook

The vast majority of respondents, particularly those in the Technology and R&D sector, perceive US-China relations as pivotal to their business operations. Nevertheless, approximately 30 percent of the respondents anticipate improvements in bilateral relations moving forward in 2024. This reflects a better sentiment among investors as compared to last year, when most companies believed that trade frictions between the two countries would continue.

It is worth noting that the survey was conducted before the Biden-Xi bilateral summit in late 2023, during which members hoped for increased accessibility to China’s market for foreign companies and adjustments in China’s data policies. Members also expressed the desire for the US government to moderate its rhetoric and engage in effective, high-level dialogues, while urging the Chinese government to ensure fair treatment of US businesses and enhance engagement with the foreign business community.

Perceived treatment of foreign companies

One-third of the survey participants report experiencing unfair treatment compared to local competitors, though there has been some improvement over the past years.

In terms of how foreign companies in various industries are treated by government policies and enforcement actions relative to domestic companies:

• In the Tech and R&D sector, 51 percent of respondents in this sector feel they are treated equally to domestic companies, rising from 43 percent last year. And 42 percent of respondents in the sector say they suffer unfair treatment, declining from 51 percent last year.
• In the Resources & Industrial sector, the perception of equal treatment has increased drastically, from 58 to 67 percent respectively in 2022 and 2023.
• The Consumer sector witnessed a slight decline in the perception of equal treatment, with 62 percent and 60 percent respectively in 2022 and 2023, but a notable increase in the perception of favorable treatment towards foreign companies, which rose from 6 to 17 percent in the same period.
• Companies in the Services sector witnessed a bigger decline in the perception of favorable treatment, going from 10 to 5 percent between 2022 and 2023. Simultaneously, they also saw an increase in the perception of equal treatment, which rose from 56 to 59 percent.

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Overall, among members across all sectors, over half of them either expressed uncertainty or lack of confidence in China’s commitment to further opening its market to foreign investments. Here, the survey reveals a 9 percent increase in optimism compared to the previous year, which suggests a cautiously hopeful outlook among members about the market access reforms.

Key takeaways

In conclusion, the key findings from the AmCham survey highlight several critical aspects shaping US-China business relations, including:

• Financial performance: American companies in China reported improved financial performance for 2023, including increased profitability and EBIT margins.
• Optimism recovery: The survey reveals an improved two-year business outlook for China, with members showing increased optimism across various parameters, particularly regarding domestic market growth, estimated profitability, and the overall economy.
• Intent to invest: China’s attractiveness as an investment destination has rebounded, with 50 percent of respondent companies now considering it among their top three global priorities, marking a 5 percent increase year-on-year.
• US-China relations: Nearly all respondents view US-China relations as crucial to their businesses. Approximately 30 percent expect improvements in 2024, indicating a higher level of optimism compared to 2023.
• Talent retention: Expatriates have shown increased willingness to relocate to China over the last year, despite negative impacts from US-China tensions and other factors affecting foreign talent recruitment.
• ESG implementation: Eighty percent of the members report implementing Environmental, Social, and Governance (ESG) practices in China, focusing primarily on strengthening Diversity, Equity, and Inclusion (DEI), employee training, and business ethics.

Despite all these encouraging aspects, certain challenges persist. In addition to complexities surrounding US-China relations, navigating China’s regulatory landscape, managing escalating costs, complying with cybersecurity laws, and safeguarding intellectual property rights have become top concerns for American investors. Moreover, most US companies still feel less favorably treated compared to their Chinese counterparts:

• Despite sectoral variations, one-third of companies report being treated less favorably by Chinese authorities than their local competitors. Moreover, 57 percent lack confidence that China will further open its markets to foreign firms, indicating ongoing concerns about market access and regulatory treatment.

These insights underscore the complexity of the US-China business landscape and highlight the importance of addressing key challenges to foster constructive, sustainable, and mutually beneficial relations between the two countries. By prioritizing regulatory transparency, widening market access, and intellectual property protection, both nations can create an environment conducive to business growth, innovation, and collaboration across the Pacific.

We continue to monitor the evolving dynamics of US-China relations in the Biden Era, as well as their impact on businesses and individuals, which can be accessed in our rolling tracker here.

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