China, already seeing a slowdown in domestic demand, is now being criticized for its challenging business environment. On September 19, the American Chamber of Commerce in Shanghai (AmCham) and the European Union Chamber of Commerce in China (EuCham) each released reports indicating a dampening business outlook for China. The two chambers of commerce represent nearly 2,000 China-based businesses.
Only 52 per cent of AmCham’s 2023 China Business Report survey respondents were “optimistic” about China’s business outlook — a dip of 26 percentage points compared to 2021. The reports emphasized the challenges of navigating the Chinese policy landscape, where rules are becoming increasingly complex and blurred, according to survey respondents.
Trade-off between economics and security
Aside from general uncertainty, a lack of credibility and transparency were also cited as reasons for this dim outlook. Pessimism among respondents, while not uniform across all sectors, was particularly pronounced in the technology industry, possibly due to China’s recent anti-espionage laws and clamp-down on due diligence firms. The EuCham report, as a result, called for its member companies to exercise caution.
EuCham's report attributed its dire business outlook to two of Beijing's seemingly contradictory objectives: attracting foreign investment while strengthening national security. These trends are taking place against the backdrop of mounting tensions between Washington and Beijing, as well as some European states, such as Germany.
China’s loss is Southeast Asia’s gain
AmCham reported that nearly half of its survey respondents intend to or already have redirected investments meant for China, with Southeast Asia emerging as the top alternative investment destination. Trade data, additionally, indicates a shift in certain segments of supply chains towards regional heavyweights like Indonesia and Vietnam.
Beijing dismissed the negative outlook from the chambers of commerce, insisting on the continued resilience and potential of the Chinese economy.
