China's business climate floundering, India a key de-risking alternate for USA Inc, says this report

Apple Inc has diversified some of its manufacturing to India, and recently, IBM Inc shuttered its research facility in China, leading to job losses.

The American Chamber of Commerce in Shanghai in its latest report has red-flagged rising US-China trade tensions and a slowing Chinese economy as key reasons forcing companies to manage risk.

The Chamber's report - 2024 China Business Survey - released on September 12, said as many as 40 percent of the companies are re-directing investments that were previously planned for China. Emerging opportunities in markets such as India and south east Asia are being seen as the most popular choice.

The report highlights that more than two-thirds of the US companies doing business in China are in the middle of some sort of de-risking exercise, and 25 percent are segregating data as 'China and non-China'. This year too, as much as 20 percent of the US companies operating in China are expected to cut their investments, a figure that had risen to 25 percent last year. The Chamber said China's slowing growth is the key reason that their investment into the country is drying up.

Read More: China directs its carmakers not to make auto-related investments in India

An alarming fact that has emerged is that industry does not seem to be having full confidence in Chinese government's ability to stimulate demand. "This year’s data indicates that while many positive policies have been announced, they have yet to fully restore confidence among private businesses or consumers in general," Allan Gabor, Chair of AmCham Shanghai said. The prospects of a disruption are evident, as the chamber has started talking about tough calls. Gabor added that US companies "must now manage a changing environment that may require them to make tough near-term decisions as they adjust their businesses to navigate new market and geopolitical dynamics."

Eric Zheng, President of AmCham Shanghai said that geopolitical uncertainties are 'weighing more than ever', urging both governments to engage in bilateral talks 'so as to stabilize the relationship.'

PwC China's Jeff Yuan added that large potential investments are 'waiting at the door, hinging on further market reform.'

The survey was taken by 306 AmCham Shanghai members, and is considered as one of the longest-running surveys of US business in China with representation from 1,000 companies.

The latest report highlights a trend that has already started to unfold in China. Apple Inc has diversified some of its manufacturing to India, and recently, IBM Inc shuttered its research facility in China, leading to job losses. Walmart too sold its entire stake in Chinese e-commerce giant JD.com.

Apple Inc has even begun to see returns on its pivot, with India sales rising 33% on year to a record high of nearly $8 billion for year ended March 2024, Bloomberg News said, citing a person familiar with the matter.

In March this year, Chinese President Xi Jinping had met American business leaders to encourage them to invest in China amid growth challenges. The meeting was attended by World Bank President Ajay Banga, IMF's MD Kristalina Georgieva and representatives of over 100 multi-national companies.