U.S. firms’ enthusiasm for China cools as political, economic uncertainty deepens

American companies’ enthusiasm for investing in China has been dampened by a combination of policy uncertainty, an economic slowdown and narrowing profit margins, the head of the U.S.-China Business Council said Friday. Attacks on Western values and on foreign companies’ business practices this year have also unsettled some U.S. businesses operating in China, while barriers to foreign investment in many sectors of the economy remain substantial, escalating concerns about the extent to which the firms will be allowed to benefit from growth in the world’s second-largest economy. In an interview during a visit to the Asian superpower, USCBC President John Frisbie said that the Chinese market is worth roughly $300 billion to American companies and that, while expansion has moderated, the market is “still showing growth when a lot of other markets around the world aren’t.” “You have market growth here, you have companies that continue to prioritize China in their investment plans,” he said. But he added, “There is more uncertainty about the policy trends, and therefore there is a little more of a tempered optimism than, say, two or three years ago.” More generally, he noted that China’s leaders have acknowledged that reforms are needed to reinvigorate the country’s economy after several years of relative inaction on that front. “Over the last 18 months or so, that reform talk has come back, which is a good thing,” he said. “The question is: What is going to be the scope and pace of the reforms?” Restrictions on foreign investment in China remain in place in 100 product or sector categories, from cloud computing to automobiles, Frisbie said. It remains unclear, he said, whether China will embark on a period of “reform and opening up,” as it did under Deng Xiaoping, or whether reforms will be undertaken without any further opening up of market access to foreign companies. On that question, he said, the signals have been mixed. “Foreign investment barriers in China are market access barriers, because U.S. companies tend to invest here to reach the domestic market,” he said. “It’s really all about: Can American companies access the growth [in China] in a way that is fair and equitable?”