HIGHLIGHTS
- More than half of U.S companies said they were reducing or delaying investment plans and expected lower revenue as a result of prolonged shutdowns.
- Political pressure is also growing on American companies to reduce their dependence on China.
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The chambers of commerce of the United States and the European Union say their members are reviewing their supply chains and considering whether to expand investment in the face of China’s zero-tolerance policy aimed at against COVID-19 or not. Michael Hart, president of the American Chamber of Commerce in China, warned on Tuesday of a three to four-year drop in investment if the situation continues.
At the same time, many members of the European Union Chamber of Commerce in China are suspending investment plans and starting to consider whether to leave. Uncertainty about the next outbreak could weigh heavily on foreign business confidence, they said. “Uncertainty is really the keyword, because it is impossible to predict the outlook or how long this might last, and what will happen next,” said Massimo Bagnasco, vice president of the Europe office said.
Earlier this month, more than half of U.S companies said they were reducing or delaying investment plans and expected lower revenue as a result of prolonged shutdowns that have congested major ports world, while shutting down highways, factories and businesses. Just last week, in a survey of 460 companies by the German Chamber of Commerce in China, respondents said almost 30% of their foreign employees plan to leave China due to Covid. Restrictions starting in March in Shanghai and other cities have made it difficult for these employees to travel to China or visit headquarters abroad.
“China usually ranks in the top three investment destinations for members of the American Chamber of Commerce, but it’s getting less and less of a priority, and if people can’t come to this country.” said Hart, it would be rejected as an investment destination.
Pressure from many sides
Political pressure is also growing on American companies to reduce their dependence on China. U.S Treasury Secretary Janet Yellen called on the United States and Europe to coordinate their approach to China, saying they have a “common interest in encouraging China to refrain from activities detrimental to all of us”. “We have become too vulnerable to countries that use their position in raw materials, technology or products to exercise geopolitical leverage or disrupt markets to their advantage.” she said in a speech in Brussels, Belgium.
European businesses continue to face challenges including labor shortages and supply chain disruptions due to lockdown measures. The pressure to leave China will increase significantly if obstacles do not improve by the end of the year, said Joerg Wuttke, chairman of the council. The economy is also unlikely to recover as strongly as in 2020 because of obstacles from technology sanctions, the real estate market continues to decline and capital flows out of China when the interest rate gap between China and the US decrease.
Wuttke called on China to speed up vaccination efforts, as vaccination among people over 65 has slowed in recent months. “China cannot hold its economy hostage because 150 to 160 million people are not fully vaccinated. This has to change, it cannot go on forever.” he said.
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