American companies are increasingly looking beyond China after Covid

American companies are increasingly looking beyond China after Covid
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Parts of Shanghai have faced intermittent restrictions on business due to Covid controls, even after a broader two-month lockdown ended in June.

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BEIJING – More than twice as many U.S. companies have cut investment in China this year than last year, according to a recent survey released Friday by the American Chamber of Commerce in Shanghai.

The report says that 19% of respondents said they would reduce investment in China in 2022, down from 10% in 2021.

According to survey participants, the main reasons for this are Covid-related closures, travel restrictions and supply chain disruptions.

“Confidence has been shaken,” said the American Chamber of Commerce in Shanghai.

The metropolis of Shanghai underwent one of the strictest lockdowns in China earlier this year, dragging the national economy back to almost no growth in the second quarter. Growth of 3.9% in the third quarter brought year-on-year GDP growth to 3% – well below the official target of around 5.5%.

Business in China

Looking at Southeast Asia

According to the results of the survey, one third of the respondents diverted their planned Chinese investments last year.

The report notes that this is almost double last year’s figure, with Southeast Asia being the most popular destination, followed by the United States.

According to the survey, Southeast Asia attracted the majority of investments, particularly in technology, logistics and retail.

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307 respondents took part in the survey from July 14 to August 14. 18, prior to the final export controls on the US semiconductor industry.

Over the next one to three years, one retailer said, it is moving all production out of China with a manufacturing company. Overall, the survey found that nine firms moved more than 30% of their production capacity from China.

The vast majority of companies in the chemical, pharmaceutical, medical device and life sciences industries planned to continue operating in China, the report said.

It still relies on China

Beijing has emphasized that it wants the country to focus more on higher-end manufacturing, while factories in more labor-intensive industries move to other countries where wages are lower.

But China, by contrast, remains a critical supplier of mostly US and EU goods, according to an Allianz Research report this month.

“This means that the US and Europe have more to lose in the extreme scenario of a complete disruption of US-China and US-EU-China trade relations,” the report said. “Loss of critical supplies would cost 1.3% of GDP for the US and 0.5% of GDP for the EU and 0.3% of GDP for China.”

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