AmCham South China: 94% of US Companies Optimistic towards 2021 Business Outlook in China

GUANGZHOU,China,Feb. 26,2021 -- The American Chamber of Commerce in South China ("AmCham South China") today released its 2021 White Paper on the Business Environment in China and 2021 Special Report on the State of Business in South China. The release was attended by over 300 government officials,business executives and members of media including over 40 foreign consulates mostly represented by their consuls general.

The 649-page bilingual White Paper on the Business Environment in China,now in its 14th year,presents a highly-researched,exhaustively-cited account of the on-the-ground business environment in China. It involves analysis of over 100 main industries and the impact of regulatory changes and COVID-19 on each,as well as analysis of trade issues,China's 14th Five-Year-Plan,Biden administration plans,and many other hot topics. The project involved more than six months and a team of highly accomplished experts from both sides of the Pacific Ocean,including seven who hold doctoral degrees,as well as respected professors,senior business executives and legal and financial scholars.

The 148-page bilingual 2021 Special Report on the State of the Business in South China,in its 17th year,meanwhile,aggregates and quantitatively analyzes the experiences of the 208 companies who participated in the Chamber's annual State of Business study. It provides a meaningful context for this year's responses on the business environment and development trends in South China straight from the mouth of companies operating in the heart of it.

With 2020 being the first year in which China's economic size expanded beyond 100 trillion yuan (US$ 15.43 trillion),foreign markets continue to look at China for business opportunities in a post-pandemic world. Most companies reported positive overall returns on investment (ROI) in 2020 in China,which were higher than their global ROI.

Compared to the previous year,more companies believe that they will see improvement in US-China relations in 2021. Dr. Harley Seyedin,President of AmCham South China and the winner of 2017 Oslo Business for Peace Award (together with Elon Musk,Durreen Shahnaz and Murad Al-Katib),which is awarded by the Award Committee of Nobel Laureates in Peace and Economics,said "There is a general consensus within the business community that the Biden administration will view the US-China relation through a different looking glass. I predict a rather long honeymoon period within which the two sides will have an opportunity to examine their differences,evaluate what is important to each side and begin friendly and mutually respectful dialogue." Dr. Seyedin also said "I expect US and China to hit a reset button and very likely start a new era of cooperation which will benefit not just US and China but the entire globe."

Key takeaways of the 2021 White Paper on the Business Environment in China and the 2021 Special Report on the State of Business in South China:

94% of American companies see a bright prospect in China's market.

None of the companies surveyed showed willingness to leave China completely.

China remains the top investment destination by more than half of the studied companies despite its decreasing attraction as a manufacturing base.

An interesting finding of the 2021 Special Report is the direct connection between the reduced number of expatriate executives in China and the massive reduction in the number of very large planned reinvestments. While total dollar amount of budgeted reinvestments has held steady due to the increase in number of large,medium and small reinvestment projects (between 1 million and 250 million US dollars each),the number of very large foreign planned reinvestment projects involving 250 million US dollars or more each have reached the lowest levels in several years (a 4/5th reduction year on year for all foreign companies and nearly 3/4th for US companies). We predict that this will severely impact China's manufacturing output two to three years from now. The last time a similar situation happened was in 2016. Our 2017 study predicted the pre COVID-19 slowdown in China's economic growth in 2018 and 2019 (GDP growth dropped to 6.6% in 2018 and 6.1% in 2019).

Comparison of US and Foreign Companies' Budgeted Reinvestment in China (2020 – 2021)

(US$250 million or larger individual projects per company)

> US$250 million

Budgeted Reinvestment in China in 2021

Budgeted Reinvestment in China in 2020

US Companies

6%

17%

Other Foreign Companies

0%

17%

Total All Foreign Companies

3%

17%

While a combination of factors including the coronavirus pandemic severely impacted the global economy in 2020,only a slight decrease in actual reinvestment in China was realized.

Factors including huge market potential,preferential policies and uncertainties of pandemic in other countries have whetted companies' interest to increase reinvestment in China or shift investment to China.

73% of American and 70% of Chinese companies studied plan to reinvest in China in 2021,while only 57% of participants from EU and others have reinvestment plans.

Nearly half of the participating companies show confidence in employment expansion despite the fact that China's economic growth reached an all-time low in nearly three decades in 2020.

The vast majority of companies still have expansion plans in China for the following three years.

Nevertheless,in view of the long-term impact brought by COVID-19,the proportion of companies expanding in China in the next three years hit a new low compared to the past five years.

Guangzhou is selected as the number one preferred investment destination in China,which remains unchanged for four consecutive years,followed by Shanghai,Shenzhen,and Beijing. Other cities including Dongguan,Chengdu,and Zhuhai are found to attract investors' interest.

2020 has witnessed a steady upswing in business environment in South China. However,companies report that rising operation and labor costs as well as,lack of qualified personnel are three serious challenges for development in South China.

An overwhelming majority of companies state that visa and travel restrictions have an adverse impact on their operation. Over 50% of them were affected by China's visa and travel restrictions while approximately 40% of them were influenced by American restrictions.

2021 is an important year for China as it is the starting point for its 14th Five-Year Plan. Therefore,"the Chamber encourages China to further open up to foreign investment. It implores the US and China to go back to the negotiation table and usher in a mutually beneficial relationship." said Dr. Harley Seyedin. He added,"by mid-February 2020 members of AmCham South China had already donated US$38 million in cash and US$1.05 million in PPEs and other supplies to Wuhan to help fight COVID-19. Their aim was to give others a chance to give their children a better life than they have had themselves and to protect them from the virus. We are proud of our members kindness in these difficult times."

About White Paper on the Business Environment in China and Special Report on the State of Business in South China

TheWhite Paperon the Business Environment in China offers a summary of China's impressive accomplishments since China's "opening-up" and examines the key influences on the business environment in present-day China,such as national policy initiatives and the global economic crisis.

The Special Report on the State of Business in South China is a quantitative study of the business environment,conducted for consecutive years by AmCham South China. Each year,AmCham's member and non-member companies participate in AmCham's State of Business study,results of which will be garnered and edited into a separate publication.

Both documents may be downloaded free of charge from the chamber's website at www.amcham-southchina.org/amcham/static/publications/publications.jsp.

About the American Chamber of Commerce in South China

The American Chamber of Commerce in South China (AmCham South China) is a non-partisan,non-profit organization dedicated to facilitating bilateral trade between the United States and the People's Republic of China. Certified in 1995 by the US Chamber of Commerce in Washington DC,AmCham South China represents more than 2,300 corporate and individual members,is governed by a fully-independent Board of Governors elected from its membership,and provides dynamic,on-the-ground support for American and International companies doing business in South China. Over the past ten years,AmCham South China has hosted on average each year more than 10,000 business executives and government leaders from around the world at its briefings,seminars,committee meetings and social gatherings. AmCham South China is a fully-independent organization accredited by the US Chamber of Commerce in Washington,DC. All AmChams in China are independently governed and represent member companies in their respective regions.

For additional information,please contact:

Ms. Yien Wu

Communication Manager

The American Chamber of Commerce in South China

Tel: 86-20-8335-1476 ext. 17

Fax: 86-20-8332-1642

E-mail: ywu@amcham-southchina.org

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