Most American firms have no plans to leave China
Most US firms in China currently have no plans to relocate production within the country or abroad due to the coronavirus, but there is less certainty about the long term due to growing worries over US-China decoupling, a survey showed.
Concerns over logistics challenges now outweigh those of factory closures, said companies that responded to the joint survey by the American Chamber of Commerce branches in Beijing and Shanghai with consultancy PricewaterhouseCoopers. A total of 68 percent reported that demand for products and services was below normal.
“Our survey results show that companies are considering adjustments to their business strategy, but there is no mass exodus as a result of COVID19,” Ker Gibbs, president of the American Chamber of Commerce in Shanghai, said on Friday.
“Still, there is no escaping the fact that the current crisis adds a new and unwelcome dimension to the conversation about decoupling.”
The novel coronavirus, which causes the respiratory illness COVID-19, was first reported in the central Chinese city of Wuhan late last year. It has led to more than 130,000 deaths and caused massive disruption to economic activity around the world.
China has taken steps since February to restart its economy by recalling workers to factories and easing travel restrictions imposed earlier to help stop the virus spreading.
On April 8, it eased a 76-day lockdown in Wuhan that cut the major industrial hub off from the rest of the country, after the number of new local infections plunged.
But the pandemic is further testing ties between Washington and Beijing, which are already strained over issues that include trade, intellectual property rights and press freedom. US politicians have accused China of withholding information about the virus while Chinese officials said the US is trying to smear China.
The survey was conducted from March 6-13 and received responses from 25 companies. It targeted senior executives from firms that had global revenue of more than $500 million and were involved in sectors from health care to consumer goods.
Respondents were a subset of 70 companies polled in October for a prior survey by the three organizations, providing a basis for comparison.
Noting how the top concerns for companies had shifted over the course of those two surveys, from the US-China trade war to the pandemic, the authors of the survey said more than half of their March respondents said it was too soon to tell whether their China supply chain strategy for the next three to five years would change. The proportion of respondents who said they thought it would be impossible for the two economies to decouple fell to 44 percent in the latest survey, from 66 percent in October.
“There is a perceived greater potential for greater economic decoupling,” said Jan Nicholas, consulting partner at PwC China. Almost 70 percent of respondents to the March survey said they expected their China supply chain operations to return to normal in less than three months, and 96 percent forecast a return to normal within three to six months. The Trump administration is now preparing to issue guidelines to reopen the US economy after the shutdown left millions of Americans jobless in the past month.
“Some of us here are concerned that we see a lack of patience, frankly, in the US market,” said Gibbs.
“Here in China, no companies enjoyed being shut down and everybody was eager to get back to work, but I didn’t get the sense that anybody was eager to rush that process.”
FASTFACT
Almost 70 percent of respondents expect their China supply chain operations to return to normal in less than three months.