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Growth prospects are today's biggest fear among US companies: US-China Business Forum

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Coronavirus lockdowns, slowing economic growth and geopolitical strife stand out among a long list of recent Chinese business news headlines.

“There is certainly a fair amount of negative business sentiment,” said Kenneth Jarrett, a senior adviser at Albright Stonebridge Group, a longtime diplomat and business observer in China. increase. 2022.

However, these sentiments have not significantly swayed US multinational interest in China, the world’s second largest economy. “Our long-term view of China and the opportunities here has not changed at all,” Jarrett told attendees at the 2022 US-China Business Forum at Forbes in New York. We spoke via Zoom. American companies “understand that if they want to succeed globally, they must succeed here in China.”

Behind that conviction lies a huge domestic market and the ability of US companies to supply it. Due to the disruption caused by the new coronavirus, some companies have switched their supply chains to countries other than China to do business. “Some companies have actually decided to further centralize their supply chains in China for products destined for the Chinese market,” said Jarrett.

Jarrett’s view of China’s long-term potential echoed that of Chinese Ambassador to the United States Qin Gang, who also spoke at the forum. “China’s economic fundamentals remain unchanged in its long-term and stable performance,” Qin said. (See this post.)

After dodging much of the impact of the 2020 and 2021 pandemics, China has suffered heavily from the impact of Covid this year. He said the certainty has affected the economy and contributed to a “cooling down of the China frenzy” likely to continue for much of this year. Anxiety has been heightened in recent days by Covid-related lockdowns in the resort hub of Hainan, a reminder that disruption can happen suddenly.

Jarrett, former president of the American Chamber of Commerce in Shanghai and former US diplomat, said: “China is definitely not in trouble as long as it remains committed to a dynamic zero-coronavirus policy.” . “There are no signs of change, which means a long rhythm of frequent testing, contact tracing and quarantines inside China,” he said. The authorities “are still struggling with balancing and conflicting goals between COVID-19 prevention and economic growth.”

The lockdown and pursuit of “zero Covid” has also added a new burden of “internal travel restrictions” similar to those involved in traveling to China from overseas, Jarrett said. It has made getting around very complicated,” he said. “The inability of companies to travel around the country and talk to customers affects their performance. And this is a problem.”

Sluggish domestic demand is also affecting the business of US companies. Consumption was expected to be the engine of China’s economy this decade, but Chinese consumers continue to save. “Not consuming is a natural response to all the uncertainty they feel, but it robs the economy of a major engine,” Jarrett said.

“Real estate is another major driver of the economy that has not played its usual role,” he said. Similarly, “exports have been a bright spot for China in the past few years, but this could change.”

In the face of so many short-term risks and headwinds, “currently there are growing concerns about the government’s ability to manage the economy and the decision-making processes taking place in Beijing,” Jarrett said. “Generally, the business community wants China to move to coexistence policies with Covid, but the government has reiterated that this is not on its mind.”

“And this has raised concerns about government priorities. Until now, companies have found the business environment in China to be relatively predictable. Overall, we made decisions that are beneficial to economic growth and the performance of multinational companies,” Jarrett said.

Another unexpected move with business implications this year was China’s decision to work closely with Russia ahead of Moscow’s invasion of Ukraine. “It’s a reminder that the Black Swan will happen again. That Black Swan wasn’t China, but it shows that geopolitics can have a dramatic impact on business.”

As a result, “more companies are looking at China-related scenarios, which usually involve Taiwan, but there are (other) ones that are not as closely considered as before.”

Overall, Jarrett said the list of current issues facing U.S. companies “are definitely affecting us at the moment. And some have hit the pause button for more investment in China.” .”

Still, the Chinese government is adding stimulus to the economy and is “trying to get things moving again.” We try to reassure the foreign business community that they are valued.”

It doesn’t solve short-term problems. “But in the long term, most companies are still very positive about the importance of China and their commitment to the market is unwavering,” he concluded.

The 4th The US-China Business Forum was hosted by Forbes China, the Chinese version of Forbes. The rally was held in person for the first time since 2019. 2020 and his 2021 he was held online at the height of the Covid 19 pandemic.

Other speakers included Chinese Ambassador to the United States Qin Gang. Wei Hu, General Chamber of Commerce of China – President of the United States. James Shih, SEMCORP Vice President. Abbey Lee, Director of Corporate Communications and Research, General Chamber of Commerce of China. Audrey Lee, Managing Director of BYD America. Lu Cao is Managing Director of Global Corporate Bank, Corporate and Investment Bank, JP Morgan.

Stephen A. Orleans, Chairman of the National Committee on U.S.-China Relations, also spoke. Sean Stein, president of the American Chamber of Commerce. Dr. Bob Li, Physician Ambassador for China and Asia Pacific, Memorial Sloan Kettering Cancer Center. Yue Sai Kang, Co-Chair, China Institute.

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