US Firms Rethink China Investment on COVID Concerns: Business Group Survey

US Firms Rethink China Investment on COVID Concerns: Business Group Survey
A woman looks in through a gap in a barrier at a residential area, amid new lockdown measures in parts of the city to curb the COVID-19 outbreak in Shanghai, China, on July 11, 2022. (Aly Song/Reuters)

WASHINGTON—Strict COVID-19 control measures in China have overtaken sour U.S.–China relations as the top concern of U.S. companies in the country, a business lobby said on Monday.

It said more than half of its firms reported the issue as a reason to cancel or delay investments in China.

"The looming possibility that companies will again be forced to partially halt operations due to lockdowns and the impacts of local controls on consumer demand have undermined confidence in the business environment," the U.S.–China Business Council (USCBC) said based on an annual survey of 117 member companies.

China's economy narrowly avoided contracting in the second quarter as widespread lockdowns and the slumping property sector badly damaged consumer and business confidence.

Risks still abound as many Chinese cities, including manufacturing hubs and popular tourist spots, imposed lockdown measures in July after fresh outbreaks of the more transmissible Omicron variant of the coronavirus were found.

Most of the companies surveyed said negative effects of Beijing's COVID measures were reversible, but 44 percent said it would "take years to restore business confidence," USCBC said.

Those policies, continuing U.S.–China tensions, and "significant market access barriers" in China despite authorities' assurances of equal treatment of foreign companies, have led to "record levels of pessimism," affecting companies' decisions about supply chains and future investments, the group said.

In the past year, 24 percent of companies have moved parts of their supply chains out of China, compared to 14 percent in the 2021 survey. Optimism in five-year business outlook for China has dropped from 88 percent in 2013 to 51 percent in 2022.

COVID travel restrictions, cybersecurity rules, cost increases, and U.S.–China technology decoupling were also major concerns.

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