Coronavirus: US firms in China struggling with plunging demand, travel disruptions as pandemic fallout continues

Orange Wang

Nearly two thirds of US companies operating in China are struggling with travel disruptions and many have recorded a sharp deterioration in demand, a new survey showed on Wednesday, as the economic damage from coronavirus pandemic casts an increasingly gloomy spell over the global economy.

Some 68 per cent of 119 mostly multinational companies surveyed in March said they were still facing domestic travel disruptions, while half were experiencing significant revenue declines, a rate nearly double the 28 per cent figure in February, according to the American Chamber of Commerce (AmCham) in China survey.

Thirty nine per cent of firms said demand for their products was down, a sharp increase from 22 per cent last month, and a quarter of respondents expected business operations to return to normal by the end of April.

But 22 per cent expected further operational delays through the summer, up from 12 per cent in February’s survey.

The results contrast with official statistics that have purported to show substantial recovery among foreign businesses in March.

The provincial government of Guangdong, a hub for foreign companies in China, said that 94 per cent of foreign companies in the region had resumed work as of last Wednesday. Beijing, the nation’s capital, has said the operations of more than 70 per cent of foreign-invested enterprises had resumed production as of last Tuesday.

“Our member companies are still wrestling with challenges brought by the epidemic, and there’s now concern about the global impact,” said AmCham China chairman Greg Gilligan.

“Since our last survey, this has now become a worldwide pandemic and close to half of the companies said the global spread of the virus would have a moderate-to-strong impact on their China operations.”

Our member companies are still wrestling with challenges brought by the epidemic, and there’s now concern about the global impact

Greg Gilligan

Of the surveyed businesses, 57 per cent said they expected their revenues in China to decrease if business could not get back to normal by the end of next month, up sharply from 9 per cent in last month’s survey.

Some 60 per cent of companies worried revenues would decline anywhere between 10 to 50 per cent, or even more, this year if the virus disruption continued until the end of August.

Most businesses – some 76 per cent – were pessimistic about the outlook for the world’s second largest economy in light of the coronavirus pandemic.

But the surveyed companies indicated they were not ready to pull out of the Chinese market, with only 3 per cent saying they were considering relocating some or all of their manufacturing production out of China.

None of the firms said they were adjusting supply chains to source components or assemble products outside China, while 40 per cent said they would maintain planned investment levels, up 17 percentage points from February.

Chinese vice-minister of commerce Wang Shouwen, together with leaders from 11 central ministries and commissions, held a conference call with AmCham China on March 12, where he said he hoped that foreign companies would maintain confidence in China and increase investment.

The impact of the pandemic would be limited and controllable, and the positive trend that has previously marked China’s economy would not change in the long run, he added.

Foreign direct investment in China fell 25.6 per cent in February from a year ago in yuan terms, after increasing 4 per cent in January, according to the data released by the Commerce Ministry earlier this month.

The AmCham China survey was conducted between March 14 and 18. Respondents were large, medium and small-sized enterprises, including those with global operations and some with operations in Hubei, the initial epicentre of the outbreak.

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