US businesses in China upbeat, making money

US companies in China remain profitable and optimistic over the growth prospects in one of the world's fastest-growing markets, despite trade tensions and a pandemic, according to a survey released in Washington on Thursday.

The survey conducted by the US-China Business Council (USCBC) in June among 107 American firms operating in China — almost half of all its members — found 95 percent of the respondents said they were profitable last year, up from 91 percent that reported commercial success in the previous year.

The companies' long-term confidence in the China market seemed not to have been dented by the persistent strained relations between the two countries, as evidenced partly by the finding that 83 percent of the surveyed companies have not moved any segments of their supply chains out of China in the past year.

Of those that did so out of concerns on uncertainty resulting from US-China tensions, only a fraction (2 percent) moved one or more segments to the United States, according to the annual member survey.

In the previous survey, 4 percent of those who were planning to bring operations out of the China market planned to return to the US.

"That a relatively small number of companies shifted supply chains speaks to the strength of China's supply-chain ecosystems and to the difficulty of relocating," the survey report noted, though it cautioned that that may not be the case indefinitely.

Already, 64 percent of the companies saw revenue growth in 2020, and still more — 70 percent — of the surveyed companies expect their revenue to increase in 2021, bouncing back to historical levels after the COVID-19 pandemic and trade war distorted outlooks in 2019 and 2020, according to the survey.

It also reported that 78 percent of companies view China's growth prospects as better than other emerging markets.

In line with their strong performance and expected growth prospects, only 6 percent are curtailing investment, while 43 percent of those surveyed plan to increase resource commitments in China over the next year, compared with a quarter of companies that committed to do so in 2020.

Nevertheless, for the fourth consecutive year, companies say their top challenge is the rocky relationship between Washington and Beijing.

Trade tensions have resulted in reputational damage to American firms, lost sales, shifts in suppliers and heightened scrutiny from regulators in both the United States and China, according to a news release from the USCBC.

"This speaks to how even though we've seen a change in administration in the United States and the beginnings of an economic recovery, many of the underlying drivers of US-China frictions remain unchanged," USCBC President Craig Allen said at a virtual event about the survey.

"Candid engagement between the two countries is a good start to re-establishing stability, but we need more of it," he said.

In addition to the tense bilateral relations, competition with Chinese companies, travel restrictions, data flows and personal information rules, and tariffs ranked as the top five challenges for the companies this year.

"In the short term, getting back to the table to build on reform progress from the phase one agreement; removing the tariffs, which harm US interests; and easing restrictions on travel between the United States and China can help get the trade relationship on track," Allen said.