US firms in China increasingly fear bilateral tensions will last for years: survey

US companies in China are increasingly fretful that trade tensions between the world’s two biggest economies will drag out over years and nearly a third said their ability to retain staff had been affected, a survey showed.

Half the companies said that they believe soured ties will last at least three years, up sharply from 30 percent in 2019, according to an annual business sentiment survey conducted by the American Chamber Commerce in Shanghai and consultancy PwC China.

Of those, 27 percent said they believe tensions will last indefinitely, compared with just 13 percent last year.

“US-China tension is the top concern for the American business community here,” Ker Gibbs, president of the business chamber, said at an event to mark the release of the report.

US-China tensions, already high after last year’s trade war, have further intensified this year due to the COVID-19 outbreak and as Washington blacklists or threatens to blacklist Chinese technology companies.

With the US election approaching, President Donald Trump this week again raised the idea of separating the US and Chinese economies, also known as decoupling, suggesting the United States would not lose money if the countries no longer did business.

Underscoring the worries about bilateral tensions as well as economic uncertainty caused by the coronavirus pandemic, only 29 percent of firms plan to increase their investment in China this year, down from 47 percent in 2019.

And 32 percent of respondents said they believe the deterioration in relations was affecting their ability to retain both local and expatriate staff — a view that was particularly pronounced in the education and logistics sectors.

“It’s about the attractiveness of a US brand given this atmosphere of tensions,” said Mark Gilbraith, management consulting leader for PwC China.

However, the proportion of companies with a pessimistic five-year outlook receded slightly, at 18.5 percent versus 21.1 percent in 2019.

The improvement may be attributable to the Phase One trade deal, the report said. Until 2019, firms with pessimistic five-year outlooks had hovered at around 7 percent for several years.

This year’s survey was conducted between June 16 and July 16 and garnered responses from 346 companies spanning sectors such as industrial manufacturing, automotive and pharmaceutical.

More than 90 percent said they were committed to remaining in China.