US-China relations: foreign firms slow expansion plans with trade tensions ‘very likely’ to expand

  • Some 90 per cent of companies in an AmCham China survey believe the US-China trade dispute is ‘very likely’ or ‘quite likely’ to expand this year
  • Although China remains the top spot for global investment, the survey says, foreign firms are slowing business expansion plans due to uncertainty

Trade tensions between China and the United States are having an increasingly negative impact on businesses in southern China compared with the past two years, according to a new survey.

Some 90 per cent of firms that took part in the survey said the US-China trade dispute is “very likely” or “quite likely” to expand this year, with 64 per cent expecting the impact on business to last for more than two years, said the American Chamber of Commerce (AmCham) in South China.

US trade war tariffs had a negative impact on nearly 60 per cent of companies in southern China last year, compared to 55 per cent in 2021 and 53 per cent in 2020, according to the special report on the state of business released on Monday, which surveyed 210 firms in December before China fully relaxed its zero-Covid policy.

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Negative impacts brought by Chinese tariffs also grew in 2022, increasing around 5 per cent. But compared with US tariffs, the impact was relatively mild, the report said.

US-China trade war timeline of key dates and events since July 2018

The respondents comprise 40 per cent wholly foreign-owned companies, 18 per cent joint ventures and 38 per cent Chinese companies.

In terms of origin, 28 per cent of the companies taking part came from the US, 25 per cent from Europe, Canada, Hong Kong or Macau and Southeast Asia and 43 per cent from mainland China.

China’s trade surplus with the US swelled to a record US$877.6 billion last year, with foreign direct investment that was actually used expanding by 8 per cent year on year to US$189.13 billion, the report said.

Foreign firms also plan to slow down business expansion in China this year due to market uncertainty and investment risks, the report said.

Companies will reserve US$18.3 billion from profits for reinvestment in China in 2023 and the next three to five years, a slide of about 31 per cent compared with last year, according to the survey.

The number of companies with more than US$250 million budgeted for reinvestment projects in 2023 has declined substantially to a five-year low of 4 per cent.

Some 74 per cent of participating companies plan to reinvest less than US$10 million, including 79 per cent of Chinese companies and 81 per cent of American companies.

No American companies have reinvestment plans for projects valued above US$250 million, compared to 6 per cent for Chinese firms – though the proportion dropped by half compared to last year.

China remains the top spot for planned global investment among 40 per cent of the participating companies, the chamber said, but the figure was at a five-year low.

Around 26 per cent of firms surveyed chose to shift some investment from China to other parts of the world last year, an increase of 3 percentage points on 2021.

Now is the best time for China and the US to come back to the negotiating table
Harley Seyedin

Vietnam remains the first choice by 35 per cent of companies when considering relocation of some or all manufacturing out of China.

The US was the second most popular destination, with Singapore dropping to third.

“Now is the best time for China and the US to come back to the negotiating table and work hand in hand to resolve their differences,” said AmCham in South China president Harley Seyedin.

“America is strongest when it is improving its condition at home and galvanising global efforts to tackle common challenges, not when it is consumed by competition with an ambitious but constrained power.”

‘We’re not like Apple’: small US manufacturers lament China losses in trade war

The war in Ukraine may contribute to the dangerous divergence between advanced and emerging markets and developing economies, he said.

More broadly, it risks fragmenting the global economy into geopolitical blocs with distinct technology standards, cross-border payment systems and reserve currencies, Seyedin said.

Such a tectonic shift represents the most serious challenge to the rules-based system that has governed international and economic relations for the last 75 years, jeopardising the gains made over the past several decades, he said.

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This article originally appeared on the South China Morning Post (, the leading news media reporting on China and Asia.

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