Confidence in China cools for US businesses

Confidence and investment in China from US businesses is cooling as the country’s economic growth moderates and labor costs rise, says a survey from the American Chamber of Commerce in the People’s Republic of China (AmCham China).

More than three-quarters of respondents said they remained optimistic about how their companies would perform in China over the next two years — but there is growing concern that the momentum for reform in the country has slowed.

Only 28% said the quality of China’s business investment environment was improving, down from 43% a year ago.

However, 71% of respondents saw their sales grow in 2012, with 44% reporting that the profit margins for their operations in China are higher than their company’s global average.

There are growing signs of a reduction of expansion plans, with only 18% of businesses expecting to increase investment in China by 21-50% in the next year; that proportion was 33% four years ago.

The main concerns are expectations of slower economic growth and concerns about the business environment: 26% cited market access barriers for foreign companies, and 22% regulatory uncertainty.

“The results of this year’s survey reflect a slightly more conservative business outlook, as China focuses on promoting higher-quality economic expansion in an era of rebalancing,” said AmCham China chairman Greg Gilligan.

“Especially in an environment with slower growth, the tenor of business policies has a substantial impact on investor sentiment.

“Regulatory improvements and progress on market reforms would help to inspire confidence that China is creating the conditions for sustainable long-term business growth.”

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