Companies say they’re optimistic about China, but expansion is slowing

March 19, 2014

A residential compound under construction in Wuhan. (Reuters)

BEIJING -- Is China still a gold mine for global investors? It’s a question many have asked of late with the continued slowdown in economic growth here.

For those who see dark clouds and fear a hard landing, a new report issued Wednesday by the American Chamber of Commerce in China added a small silver lining.

The China Business Climate Survey showed 75 percent of the chamber’s members remain optimistic or slightly optimistic about the two-year business outlook in China, from 2012 to 2014, despite concerns of slowing growth, rising costs, market access and intellectual property rights infringements.

What’s odd and perhaps telling is that in the face of that professed optimism, more companies are scaling back expansion plans for China, according to the report. For the first time, the majority planned to increase China investments by 10 percent or less, with the proportion of companies planning no increase rising sharply.

It’s a seeming contradiction between confidence and investment.

More than 70 percent of respondents in the recent survey reported a slight or substantial increase in revenue in the past year, but for the third year running, companies reporting slight increase or slight decrease are more prevalent.

So what’s happening in China, at least according to this report, is that while companies say they're confident, they're being cautious on spending. And if they are not investing in China, where is the money going?

President Obama’s argument is that it’s increasingly going to the United States.

In his recent State of the Union address, President Obama declared, “For the first time in over a decade, business leaders around the world have declared that China is no longer the world’s number one place to invest; America is.”

According to a White House spokesman, Obama was drawing from the 2013 A.T. Kearney Foreign Direct Investment Confidence Index, which showed the following: “The United States reclaims the top spot for the first time since 2001. Losing its previous post-crisis momentum, it recorded just $167.7 billion in FDI in 2012. Looking forward, however, investors are optimistic about the United States' solid fundamentals.”

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