Covid lockdowns, slow economic growth and geopolitical conflict stand out on the long list of less-than-glowing business news headlines from China of late.
"There definitely is a fair amount of negative business sentiment out there," says Kenneth Jarrett, a senior advisor at Albright Stonebridge Group and long-time diplomat and China business observer who has been on the ground in the country throughout a tumultuous year there in 2022.
Yet that sentiment hasn't done much to shake the interest of American multinationals in China, the world's No. 2 economy. "The long-term view of China and the opportunities here has not changed at all," Jarrett told attendees of the 2022 U.S.-China Business Forum held at Forbes on Fifth in New York. Jarrett spoke via Zoom from Shanghai. American companies "understand that if they want to be successful globally, they have to be successful here in China."
Behind that conviction is a big domestic market and an ability of U.S. companies to supply it, even if Covid disruptions have led some to switch supply chains to other countries for business outside of China. "Some companies are actually deciding to concentrate further the supply chains in China for those products that are destined for the China market," Jarrett noted.
Jarrett's views about the long-term potential of China echoed those of China Ambassador to the United States Qin Gang, who also spoke at the forum. "The fundamentals of the Chinese economy for long-term, steady performance remain unchanged," Qin said. (See post here .)
After avoiding much of the fallout from the pandemic in 2020 and 2021, China has suffered from Covid's impact in a big way this year. Uncertainty about the government's zero-Covid policy and disruptive lockdowns associated with it have contributed to a "cooling of the enthusiasm about China" that is likely to affect the economy and last for much of this year, Jarrett said. In recent days, anxiety has been stoked by Covid-related lockdowns in resort hub Hainan — a reminder of disruptions can happen suddenly.
"China definitely is not out of the woods as long as they remain committed to the dynamic zero Covid policy," said Jarrett, a former president of the American Chamber of Commerce in Shanghai and a retired U.S. diplomat. "There’s no sign that’s going to change, which means that within China this rhythm of frequent testing, contact tracing and quarantine is going to be with us for a long time," he said. Authorities are "still struggling with the balance and conflicting goals of Covid prevention and economic growth."
Lockdowns and pursuit of "zero Covid" are also adding a new burden of "restrictions on mobility within the country" that resemble those involved in traveling from overseas into China, Jarrett said. "Suddenly domestic mobility has become a huge complication," he said. "For companies to not be able to travel domestically and talk to their customers has an impact on performance. And this is something that is a problem."
Sluggish domestic demand is also affecting business at U.S. companies. Consumption had been expected to be a driver of Chinese economy this decade, yet consumers in China are saving. "Not spending is a natural reaction to all of the uncertainty that they feel, but it deprives the economy of a key driver," Jarrett said.
"Property is another key driver of the economy which isn’t playing its normal role," he said. In the same way, "although exports have been a bright spot for China over the last couple of years, there’s a possibility that this could change" in the event of slower global growth around the globe.
In the face of so many short-term risks and headwinds, "there is now a heightened worry about the government’s ability to manage the economy and the decision-making process that takes place in Beijing," Jarrett said. "In general, the business community would like to see China move to a live-with-Covid policy, but the government has said repeatedly that this is not something that it has in mind."
"And this has triggered worries about the government’s priorities. In the past, businesses have found China business climate has been relatively predictable. The government hasn’t been perfect, but generally has made decisions that have been beneficial to economic growth and the performance of multinationals," Jarrett said.
Another unexpected move with business repercussions this year was China’s decision to align tightly with Russia ahead of Moscow's Ukraine invasion. "It's a reminder that black swans do reoccur. That black swan was not in China, but it does show how geopolitics can dramatically affect business."
As a result, "more businesses are looking are closely at China- related scenarios. This normally involves Taiwan, but there are (others) that haven’t been considered as closely as before."
Overall, Jarrett said, the current list of troubles facing U.S. companies has "definitely had an impact at the moment. And some have hit the pause button for additional investments into China."
And yet the Chinese government, for its part, is adding stimulus measures and "trying to get things moving again. There’s been a lot of attention to U.S. companies here in Shanghai from local government leaders, and officials at the central government level have also tried to reassure they foreign business community that they are valued."
That isn't eliminating the short-term troubles "and companies are feeling a bit negative," Jarrett said. "But long term most companies are still quite positive about the importance of China to them," and their commitment to the market hasn't been shaken, he concluded.
The 4 th U.S.-China Business Forum was organized by Forbes China, the Chinese-language edition of Forbes. The gathering was held in person for the first time since 2019; it was held online in 2020 and 2021 during the height of the Covid 19 pandemic.
Other speakers included China Ambassador to the U.S. Qin Gang; Wei Hu, Chairman, China General Chamber of Commerce – USA; James Shih, vice president, SEMCORP; Abby Li, Director of Corporate Communication and Research, China General Chamber of Commerce; Audrey Li, Managing Director, BYD America; Lu Cao, Managing Director, Global Corporate Bank, Corporate & Investment Bank, J.P. Morgan.
Also speaking were Stephen A. Orlins, President, The National Committee on United States-China Relations; Sean Stein, chairman of the U.S. Chamber of Commerce; Dr. Bob Li, Physician Ambassador to China and Asia-Pacific, Memorial Sloan Kettering Cancer Center; and Yue-Sai Kan, Co-Chair, China Institute.
See related posts:
- American Companies Need Chinese Consumers
- As Trump Moves to End Trade War With China, Business Asks: Was It Worth It?
- Howes: Washington dysfunction weighs on business, growth prospects
- China’s Slowdown Looms Just as the World Looks for Growth
- One Trump Victory: Companies Rethink China
- China’s Entrepreneurs Are Wary of Its Future
- China Pledges Openness in Hopes of Reaching a Trade Deal
- China Proceeds With Belt and Road Push, but Does It More Quietly
- Alibaba, an Icon of China’s Growth, Now Reflects Its Slowdown
- U.S.-China Trade Talks Face Big Obstacle: Ensuring That Promises Are Kept
- China Offers Trump a Trade Peace Deal. It May Not Be Enough.
- China Appears to Block Microsoft’s Bing, Despite Company’s Own Censorship
- China Appears to Block Microsoft’s Bing as Censorship Intensifies
- U.S.-China trade talks enter crucial phase before Trump's tariff call
- China is buying fewer cars. GM and VW are feeling the pain
- Levi's wants to be more than a jeans company, so it's going public
- With Kim’s Visit, China Shows U.S. It Has Leverage on Trade
- Trump Optimistic on Trade Deal With China, but May Keep Tariffs Anyway
- Lighthizer strikes a tough tone on China trade talks
- Pound US dollar exchange rate: GBP falls as US-China trade talks progress
Growth Prospects Top Today’s Angst Among American Companies: U.S.-China Business Forum have 1410 words, post on www.forbes.com at August 12, 2022. This is cached page on Business News. If you want remove this page, please contact us.