US firms optimistic despite tensions

DESPITE concerns over US-China trade tensions, American companies still see opportunities to bolster profits in 2019, according to a report by the American Chamber of Commerce in Shanghai released yesterday.

In spite of the deteriorating trade relations between the biggest two economies, 76.8 percent of US companies in China reported profits in 2018, similar to previous years.

All logistics companies posted profits, as did 93.3 percent of chemical firms and 89.9 percent of pharmaceuticals, medical devices and life sciences firms.

The outlook for 2019 has dimmed though, with only 50.5 percent of companies expected revenues to beat their 2018 numbers.

Given that no resolution to the trade war was in sight when the survey was taken (from June 27 to July 25), five-year optimism dropped for the first time since 2015 — only 61.4 percent of companies were optimistic about the five-year business outlook, a decrease of 19 percentage points from the previous year.

American companies, however, still see opportunity, with 59.2 percent of survey respondents saying that increased consumption will be the top factor to benefit their industry in the next three to five years.

Similarly, 40 percent of those increasing investment in China are doing so due to the growth potential of the Chinese market.

“The allure of a growing consumption story keeps many here,” said Eric Zheng, Chairman of AmCham Shanghai. “If China improved market access for foreign companies and made the regulatory environment more predictable, it could bolster the case for US companies to stay.”

Respondents report an improving regulatory environment, and operational environment for foreign companies also showed significant signs of progress.

“Our members have seen improvements in the level of corruption and fraud in China, and some progress in the protection of intellectual property,” said AmCham Shanghai President Ker Gibbs.

Meanwhile, nearly all the regulatory issues that most concern the AmCham members, such as transparency, forced technology transfer and procurement practices, have improved this year.