US companies in China cut revenue forecasts and investment plans

BEIJING – A new study finds that more US companies in China are lowering revenue expectations and future investment plans as Covid controls continue.

Between late March and late April, the proportion of respondents reporting the impact of Covid restrictions rose 4 percentage points to 58%, according to a survey by the American Chamber of Commerce in China released Monday.

While that’s not a huge increase, 4 or 5 percentage points each month could be “very significant” if Covid controls continue for another five months, Michael Hart, president of AmCham, told CNBC in a phone interview.

When asked what impact the Covid restrictions will have if they continue for the next year, more than 70% of survey respondents said Revenue or profits will be reduced.

The latest study, conducted from April 29 to May 5, covered 121 companies operating in China. That time period included The latest Covid restrictions in the capital, Beijing.

Pre-scan With AmCham Shanghai in late March, just like Shanghai’s original two-part lockdown plan they started. These procedures lasted much longer than the first week.

In the past few days, the city of Beijing has postponed the reopening of schools until further notice, ordering all non-essential businesses in a major business district to close temporarily or have their employees work from home.

“There are very few aspects of the economy that appear to be working,” said one of the respondents to the report, who withheld the respondent’s name and location. “[While] COVID-19 restrictions can be managed, what [will be increasingly difficult to] A management lacking overall growth of the economy and what appears to be a growing economic headwind.”

Since China tightened border restrictions in 2020 to control the transmission of Covid from travelers into the country, Foreign trade organizations said it is difficult to recruit employees. This is due to a lack of international flights to China and quarantine times on arrival of at least two weeks, if not longer.

“If you want to invest you have to allow travel,” Hart said, noting that the effect would be felt in the long run.

“Two, three or four years from now I expect a huge drop in investment in China because there are no new projects being worked on, because people can’t come and look into the space,” he said.

If Covid controls continue for the next year, 53% of respondents in the latest AmCham poll said they would reduce investment in China.

By industry, technology and research and development companies have reported the biggest impact of Covid controls on their investment plans, with 53% of those surveyed in the sector anticipating delays or cutbacks.

On the other hand, only consumer companies reported plans to increase investment, albeit only 4% of members in the sector. For the industry, 36% planned to reduce investment, while 29% said they would delay investment as a result of the recent outbreak.

The consumer sector was also the only one to report some increase in annual revenue expectations despite the impact of Covid, at 3% of respondents. However, the majority of consumer companies, or 69%, said they had lowered revenue forecasts for this year.

Many different cities across China have enacted some form of lockdown, Truck and truck drivers often require special permits and frequent negative virus tests to transport goods.

Part of the difficulty, Hart said, is the inconsistent implementation across provinces and cities of what China calls its “dynamic non-proliferation” policy.

Locally, “Government officials are looking for practical ways for companies to solve their problems and get back to work, because these people are judged by economic performance,” Hart said. “When we talk to the government in [a] High level, it is not focused on the economy. It is a focus on health and the reduction of Covid.”

“Based on the experience of our companies in the US, Europe and other markets, we have seen that other countries have taken a different strategy,” he said. “We’re just asking for more balance.”

Last week, the Chinese president Xi Jinping led a meeting emphasized on The country must “fight resolutely” against all questions about anti-virus policies. The meeting also warned of economic consequences if China does not adhere to its dynamic policy of non-proliferation of COVID-19 virus.

In November, The Chinese Center for Disease Control and Prevention published a study who warned that switching to a “coexistence” strategy in other countries would likely result in hundreds of thousands of daily cases – destroying the national medical system.

On Monday, mainland China reported 349 new asymptomatic COVID-19 cases and 3,077 asymptomatic cases, most of them in Shanghai — which has recorded six deaths a day.