The US-China Business Council has released the key findings of its 2016 annual member survey. For the past 11 years, USCBC has polled its members on their business performance in China and their priority issues.
1. Business outlook reflects slowing growth
- China's growth slowdown is impacting American company financials and market sentiment. Nearly 20% of survey respondents expect revenue to decline this year, through two-thirds anticipate continued growth.
- Companies are responding by doing what would be expected - cutting costs, slowing investment, controlling hiring... but not pulling out.
- Despite slowing growth, 90% of companies remain profitable, but at reduced rates that reflect increasing competition, rising costs, regulatory impediments, and, in some sectors, overcapacity.
- Business confidence continues to soften. Almost three-quarters of companies have an optimistic or somewhat optimistic five-year outlook, the lowest total over the past decade. Pessimism remains low (10%), however.
2. Policy uncertainty undermining confidence
- Three years after China announced significant reform goals, most American caompanies are not seeing significant changes in the business environment.
- The biggest driver of reduced confidence is the policy and regulatory environment, followede by the market slowdown and profit margins squeezed by increasing competition, rising costs, and overcapacity.
- Of the Top 10 challenges, six would be impoved by a high-standard US-China Bilateral Investment Treaty
3. China still outpaces other markets
- Despite the challenges of a slowing economy and increasing domestsic competition, China remains a priority market for American companies. 91% of companies say China growth prospects are the same or better than other emerging markets.
- USCBC estimates that China is a $400 billion market for US companies — tied with Mexico as the second-largest foreign markets for American goods, services, and farm products after Canada — but it should be more. Addressing market access, intellectual property protection, and level-playing field concerns in China must continue to be a priority during the remainder of the Obama administration and the next president.
Read the full report here.