Washington [US], September 12 : US firms are shifting investments out of China as confidence plunges following slow export growth, drowning debt in the world's second-largest economy.
China now no longer remains a preferable destination of investment for companies based in the United States. The country has now hit a record low on business coming from the US due to its worsening bilateral ties and slowing economic growth, according to a new survey released on Thursday.
The 2024 China Business Report, released by the American Chamber of Commerce (ACC) in Shanghai, claimed that only 13 per cent of respondents ranked China as their most preferred investment destination; this result was down by four percentage points, being the lowest in the survey's history, Nikkei Asia reported.
Similarly, the rank of China being one of the top three destinations also witnessed a decline to 34 per cent falling from 53 per cent four years ago. Meanwhile, the number of respondents who said China was a low-priority investment destination is up by 24 per cent.
The critical situation of bilateral tensions, according to Nikkei Asia, was the biggest concern of the US companies.
According to the survey by CAA, two-thirds of the respondents had dictated the US-China trade tensions as the top challenge for their company operations for the coming three to five years.
The recent debate between US presidential candidates Donald Trump and Kamala Harris also pointed out no improvements in US-China relations ahead of the November election. Harris, during the debate, had accused Trump of enabling American semiconductor chips to China during his tenure, which helped modernise the Chinese military.
However, Trump responded that under the Biden administration, in which Harris was vice president, Chinese companies built auto factories in Mexico and undermined manufacturing jobs in the US.
China's ongoing economic slowdown is another concern for 60 per cent of respondents participating in the survey. China's fall in real estate prices and worsening job security have resulted in low consumer confidence in the Chinese economy.
Furthermore, this has prompted economists to question, if China could meet its official growth target of 5 per cent in 2024, the same news report claimed.
This year's survey quoted in the Nikkei Asia report, was conducted between May 20 and June 25 with participation from 306 US companies. The AAC's findings matched the results of a similar survey conducted in early 2024 by the European Union Chamber of Commerce.
According to the Nikkei Asia report, the European survey published its China Position Paper 2024-25 and urged the Chinese government to follow through on its reform pledge announced previously.
Jens Eskelund, president of the EU chamber in the Nikkei Asia report said "For a growing number of companies, a tipping point has been reached, with investors now scrutinizing their China operations more closely, as the challenges of doing business are beginning to outweigh the returns. We believe that China's relative attractiveness as a location will continue to deteriorate unless we try to address some of these concerns here."
The chamber cited China's economic slowdown and weak domestic consumption as new challenges faced by its members. Additionally, long-existing reasons such as market access and Beijing's prioritization of national security over the economy were also a bust.
According to the Nikkei Aisa report, these factors have also resulted in a significant decline in foreign direct investment coming towards China. Reportedly, for the first seven months of the year, the inbound FDI in China fell 29.6 per cent totaling 539.5 billion yuan (USD75.8 billion), according to data released by the Commerce Ministry. Moreover, USD 5.6 billion was recorded as FDI in July, which remained the lowest within a single month since 2008.
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