Why US Firms Are Shelving Investment Plans In China

US and China Relations

More companies in the U.S. may be holding off on making investments in China as a result of Trump’s call for steep tariffs on the country, The Wall Street Journal reported.

According to results from the annual survey of members of the American Chamber of Commerce in China, the percentage of companies that have China in their top three investment targets dropped to 56 percent. That number reached its lowest point since 2009, the data confirmed.

Four out of the five companies surveyed expressed feeling less welcome in China, almost double the rate from just three years ago, WSJ confirmed.

The survey results were based on the responses of 462 American Chamber of Commerce in China members, which represents a total of 900 companies in China, about 80 percent of which are American.

While it may not be clear exactly how much the opinions of President-Elect Donald Trump will impact U.S.-China relations, WSJ noted that the specter of Beijing retaliation has risen as a result of the tariffs he has called for. This has undoubtedly made many companies in the U.S. hold off on deepening their investments in the country.

The survey showed that, while nearly 72 percent of companies believe that positive relations between Beijing and Washington are “very” or “extremely” important, just 17 percent actually believe those interactions will improve as 2017 progresses.

“This is somewhat sobering,” William Zarit, chairman of the American Chamber of Commerce in China, told WSJ. “A growing majority feel that a strong bilateral relationship is important to their companies’ success,” he said.

Earlier this month, Jack Ma, the head of China’s largest eCommerce site, Alibaba, met with President-Elect Donald Trump to discuss job creation in the U.S. during the course of the next five years.

According to a report by CNBC, Ma committed to creating 1 million new jobs in the U.S. and discussed Alibaba’s planned expansion in the U.S. in a meeting with Trump. While Ma and Trump were expected to have a productive conversation, it does come at a time when tensions are growing between Trump and China.

Trump has already called for big tariffs on trade with China. At the same time, Trump has been critical of eCommerce giant Amazon, which, in addition to being the leading eCommerce company, also offers cloud services and a third-party marketplace. Trump has said Amazon will have “such problems” when he becomes president because of the tax structure of the company, noted the report.