June 07, 2019
While the world media is engrossed with the Huawei Google saga and “who really pays” for the trade tariffs, an interesting China-based report with significant implications for global business operations in the country seems to be running under the radar.
Three-quarters of American companies and four out of five manufacturers operating in China are feeling the impact of “tit-for-tat” tariffs, according to an American Chamber of Commerce in China (AMCHAM) report. (Based in Beijing and Shanghai, AMCHAM offers advisory services to U.S. companies in the country. It also conducts regular surveys of economic and business trends. U.S. business visitors to China regularly call into their offices for a quick briefing.) AMCHAM’s latest 250-company survey, published this week by the Chinese financial media group Caixin Media, looks at how the tariffs themselves, and associated non-tariff retaliatory measures by the Chinese authorities, are affecting their business.
As our Director of Global Affairs Alan Wild wrote in January, there was anecdotal evidence of U.S. businesses finding day-to-day life more difficult in China as a result of the trade war. The AMCHAM data seem to confirm this.
The graph on the lower left shows more than a half of companies surveyed reported a decrease in product demand with an associated impact on price and profit margins. 13.9% of companies reported reductions in the number of employees in China. On the non-tariff side summarized on the right-hand graph, although around a half of companies said their general operating environment had not changed, one in five said they were subject to more government inspections—the issue pointed out in the January blog. A similar number noted that customs clearances had slowed down and one in six referred to slower license approvals.
Perhaps even more significantly, AMCHAM also reported that 41% of respondents were moving or considering moving some manufacturing capacity out of the country, and a third were holding off on investment decisions. China’s official unemployment for the first months of this year show an uptick in urban unemployment figures and recent enquiries amongst U.S. companies looking at approaches to downsizing are up.
These developments have significant implications for HR: