US companies in China mostly oppose tariffs, survey shows

July 12, 2018 | By | Reply More

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Nearly 69% of the 434 respondents to the annual China Business Climate Survey of the American Chamber of Commerce in Shanghai opposed tariffs, while 8.5% backed them.

The US and China are locked in a trade war. (Reuters pic)

SHANGHAI: Most US businesses operating in China oppose using tariffs as a weapon to solve their problems ranging from market access to poor protection of intellectual property rights, a survey suggested on Thursday.

Nearly 69% of the 434 respondents to the annual China Business Climate Survey of the American Chamber of Commerce in Shanghai opposed tariffs, while 8.5% backed them.

The survey, conducted from April 10 to May 10, reflects the mix of concerns and realities for American businesses in China at a time of heightened uncertainty as the Trump administration raises the ante in its trade war with Beijing.

President Donald Trump accuses China of unfair trade practices that benefit its firms while hobbling US companies and creating an outsized trade deficit for the United States.

Washington raised the stakes in its trade war with China on Tuesday, proposing 10% tariffs on an extra US$200 billion (RM810 billion) worth of Chinese imports, from food products to tobacco, chemicals, coal, steel, and aluminium.

“One should give the Trump administration credit for getting China’s attention because for many years there have been extended discussions about market access issues that plague foreign companies here in China, and the progress has been pretty slow,” said Ken Jarrett, president of AmCham in Shanghai.

However, extrapolating from the survey findings, Jarrett said multilateral negotiations were a preferable approach.

“Now that the US government has China’s attention I think actually there’s no alternative but to try to go back to the negotiating table,” said the former US Consul General in Shanghai.

While US firms still face challenges in China, 34% of respondents felt state policies toward foreign firms had improved, up from 28% last year, the survey showed.

Those that felt policies had worsened for foreign firms fell to 23% from 33% last year. Sixty percent said the regulatory environment lacked transparency, on par with 2017.

Protection of intellectual property rights and licensing requirements were the top two regulatory challenges.

The Trump administration has complained that US companies are forced to hand over key technology to access China’s market.

Twenty-one percent of firms in the survey said they felt pressure to transfer technology, with aerospace and chemicals firms leading the way at 44% and 41% respectively.

China’s Cybersecurity Law, which took effect last year, had disrupted businesses, the survey said, while VPN policies made work harder for 56% of companies.

While tariffs were not popular, 42% of respondents favored investment reciprocity as a way to push for change in market access, up from 40% last year.

However, those opposed to reciprocity grew to 16% from 9% last year, and the number of unsure respondents slipped to 31% from 44%.

“Despite the relative optimism, our members feel guarded about the future,” AmCham said.

Concern about preferential treatment for Chinese firms and pressure for US technology transfers is “stoking demand for reciprocity in the US-China trading relationship, even if the members generally oppose the use of retaliatory trade tariffs”.

The main operational challenge was rising costs, an issue cited by 95% of respondents. More than 85% said domestic competition was a challenge.

The proportion of companies expecting to be profitable in China was basically flat at about 77%, the survey showed, but firms also signaled a slight pullback in investment.

Fifty-three percent of firms increased investment in 2017, down from 55% the year before, highlighting a trend of reduced investment growth since a 2012 peak, when 74% of respondents said they had boosted investment in China.

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