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Almost half of the large American companies that are active in China have been disadvantageously affected by overcapacity in the country, according to a new survey, which underlines the deepening of worries about the slow demand and the rising deflotional pressure in the second largest economy in the world.
An annual survey by the US-China Business Council showed that overcapacity had hit 42 percent of the respondents, considerably an increase of the 25 percent that reported an impact last year.
This year, the first that overcapacity was one of the 10 biggest challenges for business since 2016, according to the Business Lobby, who responded between March and May 130 member companies, of whom more than half have annual Chinese sale of more than $ 500 million.
“Redings fall and at the same time we see an increase in the risk. It should not surprise the Chinese government that the investment will fall,” says Sean Stein, president of USCBC.
The group said that the research results, which were released on Wednesday, have shown that China’s overcapacity problems have spread from the mainly finding industrial sectors such as steel to wider parts of the economy, including healthcare and consumer goods.
One -like percent of the affected companies said that the overcapacity crisis the prices in their sectors fell. Companies also reported shrinking profit margins.
“As investments and production stimulate a larger part of China’s economic growth, the concern about overcapacity is intensification,” the report said.
Overcapacity remains a sensitive problem for Beijing. Chinese officials have strongly disputed complaints from its trading partners, including the US and the EU, that its industrial policy and subsidies flooded the world markets with artificially cheap goods and extraordinary local companies.
More recently, China’s leadership has recognized the consequences of overcapacity, using the term Neijuan Or “Involiation” to expose excessive price competition in some sectors. President Xi Jinping and other leading officials have written a number of articles that attack overproduction and price competence caused by Neijuan.
Furthermore, the USCBC survey showed that 88 percent of the respondents were concerned about the state of the Chinese economy, struggling with a long -term crisis in real estate and a weak domestic consumption.
Official data this week showed that the GDP of China was expanded by 5.2 percent year after year in the second quarter. In nominal terms, which reflect the actual market prices and include the impact of deflation, according to Macquarie, growth was slower by 3.9 percent.
Geopolitical tensions also came to American companies in China pain. American companies investigated said that tumultuous American China relations were a major challenge, with Tit-for-Tat exchanges of rates and American export checks that disrupt supply chains, damage their reputation and cause lost sales.
The US and China are currently in a tariff weather barracks, after the parties signed an agreement in May to reduce their rates from rates to 145 percent while negotiating a more extensive trade agreement.
Together the problems have affected business trust. Less than half of the respondents expressed optimism about their five -year prospects in the country.
More than a quarter of the groups investigated moved or considering moving from China, an increase of 19 percent last year.
Kyle Sullivan, who leads the Business Advisory Unit of USCBC, said the lobby had observed a record number of members that withdrew from further investments.
There was “a dramatic drop-off from the number of companies that assign new investments to China this year,” said Sullivan.
