US companies are becoming increasingly negative about doing business in China due to rising tensions between the two nations, according to Michael Hart, President of the American Chamber of Commerce in China (AmCham China). AmCham China’s annual survey found that 55% of its members no longer consider China a top-three investment priority, while 66% cited the “uncertainty of bilateral relations” as their main challenge. This pessimism reflects several factors, including the difficulty of travel, rising labour costs, political pressure, and China becoming less predictable as a place to do business.
These challenges have emerged amid a backdrop of disagreements between the governments of President Xi Jinping and President Joe Biden over numerous issues, ranging from Ukraine to Tiktok. The US-China trade relationship is crucial to the global economy, and the two countries’ mutual dependence will have significant implications for it. In 2021, trade between the two countries hit a record high of $690.6bn, with China’s dependence on US technology products providing a vital lifeline for the US economy.
However, with 66.4% of US imports from China and 58.3% of Chinese imports from the US still subject to tariffs, according to the Peterson Institute for International Economics, both countries are maintaining a tough stance. The US is also seeking to build alternative supply chains outside China, but this move is unlikely to have a significant impact, since other countries would still rely on China for components, particularly in sectors such as green energy, medical technology, and electronics.
The current state of the US-China relationship reflects a tumultuous few years, during which corporate pessimism has grown. However, despite the difficulties, trade has remained a central element of the relationship, with companies striving to de-risk their supply chains. Nevertheless, experts warn that the way the US is approaching its relationship with China could lead to a deterioration of the global trading system, as well as global governance if the US withdraws from multilateral institutions.
Ultimately, China’s need for US technology products and the US’s reliance on China as a production hub mean that the tenor for global trade is set by the relationship between these two nations. However, with US companies increasingly looking to diversify their supply chains outside China, it remains to be seen how this relationship will evolve in the coming years