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July 13, 2017

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US firms’ profits up, China losing its appeal

US businesses in China reported better profitability for the past year but are less likely to make the country their top investment priority, the American Chamber of Commerce in Shanghai said in a report yesterday.

Seventy-seven percent of respondents said they were profitable last year, 5.5 percentage points higher than in the previous year, according to the 2017 China Business Report co-authored by PricewaterhouseCoopers.

The survey covered 426 AmCham Shanghai member companies. Respondents largely attributed the improved performance to the government’s stimulus package.

Manufacturing contributed most to the improvement, with 83 percent of respondents saying they were profitable, 3 percentage points higher than last year.

Companies also reported greater optimism for this year — 82.3 respondents expect revenue to grow, 6.3 percentage points higher than last year. On a five-year scale, 71 percent of respondents said they are optimistic, the same as last year.

But the survey found the number of companies naming China as their top investment destination declined 5.4 percentage points to 23.6 percent.

A fifth of respondents said they are redirecting investment away from China under the pressure of rising costs, slower economic expansion and tougher domestic competition. Southeast Asia and the US were the most popular alternatives.

Market barriers, policy preference for local companies and insufficient intellectual property rights protection also hurt US companies’ confidence in China. Foreign direct investment fell 0.7 percent year on year to 341 billion yuan (US$50.85 billion).


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