24th September 2021 – AmCham Shanghai’s 2021 China Business Report shows that American businesses in China bounced back quickly from the 2020 COVID-19-induced shutdown. The recovery has continued into 2021, with most companies optimistic about profits and investing more to take advantage of China’s anticipated future growth.

• 77.1% of respondents reported profits in 2020, in line with the past several years.
• 82.2% of companies projected full-year revenue growth in 2021, a return to levels last seen before the most brittle days of the US-China trade war.
• Over the next three to five years, 69.7% of respondents expect revenue growth in China to outpace their companies’ worldwide growth, while only 10.2% anticipate it being lower.
• 59.5% of companies reported increased investment for 2021 compared to 2020, up 30.9 percentage points from last year, and near 2018’s pre-trade war and pandemic level of 62%.

Despite cool US-China relations and outstanding disagreements on trade and tariff issues, our members’ optimism about the five-year business outlook in China has nearly returned to levels that predated the US-China trade war. Of the 338 respondents that answered this year’s survey:

• 77.9% of companies described themselves as either optimistic or slightly optimistic about the five-year business outlook, a return to the figures observed from 2015-2018.
• Only 9.8% of companies were pessimistic, versus 18.5% in 2020 and 21.1% in 2019, the height of the US-China trade war.

Speculation that some US companies might move production or supply chains out of China in the aftermath of COVID-19 proved unfounded. However, global boards that were rebalancing assets away from China cited US-China tensions as their primary reason for doing so.

• Of the 125 respondents that said they manufacture in China, 72% had no plans to move any production out of China in the next three years. Of the remaining 28% that do plan to move at least some production, only two companies (1.6%) will move all production out of China in the next three years. No companies were relocating their production from China to the US.

While COVID-19’s negative impact on much of the global economy has weighed less heavily on our members, foreign companies are having difficulty bringing staff to China because of the strict quarantine requirements.

• More than half of companies (53.4%) said COVID-19-related travel restrictions hurt their ability to attract and retain foreign talent.
• Nearly half (45.1%) of respondents said COVID-19-related restrictions negatively impacted their operations, while 35.9% said it impacted their staffing and 33.8% said it hurt revenues.

After recording improvements in China’s regulatory environment over the past few years, this year companies were less positive about regulatory progress.

• In 2020, 51.4% of companies called the regulatory environment transparent, a 9.5 p increase over 2019. This year, that number dropped to 46.7%.
• Industries that most encountered some or strong favouritism toward local companies included technology hardware, software and services (75%), pharmaceuticals, medical devices and life sciences (69.6%), and automotive (69.5%).

“Business in China recovered quickly from last year’s lockdown. However, we are still feeling the pandemic’s effects, with members continuing to be negatively impacted by China’s travel restrictions. Overall business performance is good but there are signs of nervousness. The regulatory environment on both sides is tightening, which narrows the space in which companies can operate,” said Ker Gibbs, President of the American Chamber Commerce in Shanghai.

“Further hindering our members, many regulatory changes were enacted after our survey closed. While well-intentioned, they were announced with little or no warning, which has unsettled companies. To continue attracting US businesses and investment, China must endeavour to create a stable business environment.”

Jeff Yuan, PwC China US MNC Business Services Group, Lead Partner, added: “Having a China strategy is still a priority for many of the US companies in China that are optimistic about the future in China. With the projected increase in investment during 2021, we anticipate an increased focus on reaching Chinse consumers by prioritising investments in sales & marketing and digital technologies.”

The report is based on the results of AmCham Shanghai’s 2021 China Business Survey, which was conducted with support from PwC China as the knowledge partner, is one of the longest running surveys of US business in China. This year 338 AmCham Shanghai members responded to the survey, which included questions about company performance, economic outlook, investment, operational challenges, hiring conditions and trade policy and tariffs.