American Businesses Operating In Southern China Optimistic About Trade

The American Chamber of Commerce in South China released its 2021 White Paper on the Business Environment in China and 2021 Special Report on the State of Business in South China.

The 649-page bilingual White Paper on the Business Environment in China, now in its 14th year, presents a highly-researched, exhaustively-cited account of the on-the-ground business environment in China. It involves analysis of over 100 main industries and the impact of regulatory changes and COVID-19 on each, as well as analysis of trade issues, China's 14th Five-Year-Plan, Biden administration plans, and many other hot topics. The project involved more than six months and a team of highly accomplished experts from both sides of the Pacific Ocean, including seven who hold doctoral degrees, as well as respected professors, senior business executives and legal and financial scholars.

With 2020 being the first year in which China's economic size expanded beyond 100 trillion yuan (US$ 15.43 trillion), foreign markets continue to look at China for business opportunities in a post-pandemic world. Most companies reported positive overall returns on investment (ROI) in 2020 in China, which were higher than their global ROI.

Compared to the previous year, more American companies reportedly believe that they will see improvement in US-China relations in 2021.

According to the report, 94% of American companies see a bright prospect in China's market, and none of the companies surveyed showed willingness to leave China completely. China remains the top investment destination by more than half of the studied companies despite its decreasing attraction as a manufacturing base.

An interesting finding of the 2021 Special Report is the direct connection between the reduced number of expatriate executives in China and the massive reduction in the number of very large planned reinvestments. While total dollar amount of budgeted reinvestments has held steady due to the increase in number of large, medium and small reinvestment projects (between 1 million and 250 million US dollars each), the number of very large foreign planned reinvestment projects involving 250 million US dollars or more each have reached the lowest levels in several years (a 4/5th reduction year on year for all foreign companies and nearly 3/4th for US companies). We predict that this will severely impact China's manufacturing output two to three years from now. The last time a similar situation happened was in 2016. Our 2017 study predicted the pre COVID-19 slowdown in China's economic growth in 2018 and 2019 (GDP growth dropped to 6.6% in 2018 and 6.1% in 2019).

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