U.S. Businesses’ Commitment To China Market “Strong And Intact”: Forbes China Forum

A long-term commitment by U.S. businesses to China’s market is “quite strong and intact” despite currently strained political ties between the two countries, a former China diplomat and business association leader said at the “U.S.-China Business Forum” organized by Forbes China on Wednesday.

 “China is simply too critical” to the long-term global strategic plans of U.S. business to be abandoned, said Kenneth Jarrett, senior advisor to the Albright Stonebridge Group. “It’s a consumption market that has arrived. Most U.S. companies are profitable and successful, and they find this a very important market to be, so there’s no intention to leave.”

“I’ve been in Shanghai non-stop since 2005. There’s really nothing about the atmosphere other than dealing with the political issues that companies face to suggest they are reassessing the importance of China to them,” he said.

Held against a volatile backdrop of the COVID-19 pandemic, stock boom, global politics and trade disputes, the forum highlighted how U.S. and Chinese businesses are trying to navigate the changing currents between two of the world’s largest economies and trading partners.   

Underscoring how discordant U.S. voices on China have become in an election year, the country drew fire on Thursday in President Trump’s speech at the Republican National Convention.  Yet a day earlier, the American Chamber of Commerce in Shanghai published a survey that found a planned Trump ban on Chinese app WeChat, owned by Internet giant Tencent, would hurt American companies (see related story here).

“If you speak to American business folks in China today, in addition to the traditional operational or regulatory challenges that they might face,  the issue that’s most on their mind is simply the direction and the poor state of U.S.-China relations,” he said. Although the year began optimistically with the “Phase 1” trade agreement, ties quickly deteriorated “into a period that right now where each day we seem to see the relationship becoming more confrontational. And this makes it very difficult for American companies to plan and to conduct their business,” Jarrett said.

Jarrett said he sees two “baskets“ of issues – some seen as related to territorial sovereignty by China, where it is faster to react,  and others where “it has been very careful not to escalate.”  Jarrett noted many examples of provincial and municipal leaders visiting American companies in which they “welcome their investment and they see positive contributions from what they’re doing here in China. That’s an important message to give to U.S. companies. And that’s been noted by the business community in China.”

Whether or not a possible decline in investments by U.S. companies in China this year would continue afterward remains to be seen.  “You would have to try to differentiate between what is caused by COVID-19 and what is caused by the state of U.S.-China relations and whether or not any sort of decline that might be the case this year is just a temporary decline, or something else that will bounce back if we’re able to emerge from some of the political difficulties. “

On the subject of supply chain investments, Jarrett said U.S. business have long moved sourcing globally in response to changing costs. The imposition of import tariffs on Chinese goods by Trump led to further calculations on targeted goods – economic and political, he said. “Surveys show relatively limited shifting of investment out of China and to the extent that it’s shifting，it’s mainly going to Southeast Asia,” he said.  “We’re seeing  movement to Mexico or to India, and actually very little is going back to the United States.

What is more important for U.S. companies at the moment, however, is sensitivity to politics, said the former diplomat. “Companies are always sensitive to politics and the need to know not to offend anyone，particularly either in the place where they’re operating — in this case，China – or the home government where they originate from,” he said. “But now I would say that challenge is particularly acute for companies. They are spending much more time trying to read the tea leaves, and being sensitive to particular nuances in nomenclature and other things,” Jarrett said. This, he noted. “is an added complication for U.S. companies these days.”

See related story:

WeChat Ban Would Hurt U.S. Companies: Survey

@rflannerychina