One-fifth of U.S. firms in Shanghai redirecting investments away from China, says AmCham
July 17, 2017 Category Foreign investment, Weekly
One in five American businesses in Shanghai indicated in a survey that they are redirecting investments planned for China to other destinations, such as Southeast Asia, amid higher costs, fiercer domestic competition and a shortage of skilled workers. According to the American Chamber of Commerce in Shanghai, the majority of its 400 survey respondents believe that the Chinese government still favors local companies over foreign businesses. The finding by the U.S. business lobbying group added to evidence that China is increasingly having difficulties attracting foreign investment despite the government’s efforts to widen market access and facilitate business operations for overseas companies. About 84 respondents, or 20% of the total participating in the Chamber’s annual survey, said that they would redirect investment outside the Chinese mainland. It was the first time figures about relocation plans have been published by the Chamber. Among the 84 companies that had plans to relocate, 29.4% said they would redirect investment to Southeast Asia. The next most favorable location for redirected investment was the U.S. (21.8%) followed by South Asia (17.6%), which includes India and Pakistan. “The dynamic of businesses is changing the labor costs,” said Ker Gibbs, Chairman of the AmCham in Shanghai. “The original reasons why those companies wanted to locate in China have changed.” In Shanghai, average wage income for employees jumped 9.5% to CNY6,500 a month in 2016. “Despite improvements in revenue and profitability, member companies are demonstrating a greater level of caution about investment in China,” the Chamber said in its report.
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