China’s slowing economy overshadows U.S. business lobby survey

Thomson ReutersEmployees work at a production line at inside an automobile factory in Hangzhou

BEIJING (Reuters) – China’s economic slowdown is hitting profits at more foreign companies, a survey by an American business lobby showed, while the vast majority of respondents believed China’s growth in 2016 would fall short of the central bank’s forecast.

The number of foreign companies rating their business profitable dropped to a five-year low in 2015, while 45 percent of about 500 respondents in the American Chamber of Commerce in China’s annual survey reported that revenues in 2015 were down or remained flat from a year earlier.

Data from China’s statistics bureau on Tuesday showed growth for 2015 was 6.9 percent, its weakest pace in a quarter of a century, capping a tumultuous year that witnessed a huge outflow of capital, a slide in the currency and a summer stocks crash..

“Although many respondents remain optimistic about China’s domestic market growth potential, almost half of survey respondents expect that China’s overall GDP growth in 2016 will be lower than 6.25 percent,” the American Chamber said in its business climate survey.

“UNCLEAR LAWS”

The People’s Bank of China in December forecast that the country’s annual economic growth will slow to 6.8 percent in 2016.

The American Chamber survey results, published on Wednesday, underscore the growing unease and challenges faced by some overseas companies in the world’s second-biggest economy.

Forty-eight percent of respondents expected GDP growth this year to reach 6.25 percent or less, while 35 percent said the economy would increase between 6.25 and 6.75 percent.

Business confidence also was impacted by regulatory and protectionist concerns, following a series of government investigations targeting foreign companies and the roll-out of a national security law limiting the use of overseas technology.

For the first time in five years, respondents cited “inconsistent regulatory interpretation and unclear laws” as the top business challenge, the report said.

Seventy-seven percent of respondents said they believed foreign companies were less welcome than before.

“While the Chinese leadership has emphasized that the country will follow the rule of law, our members continue to report that the regulatory and judicial process are less than fair and lack adequate oversight,” James Zimmerman, Chairman of AmCham, said in the report.

Overall, 64 percent of respondents said their companies were financially profitable in the last year, compared with 73 percent in 2014.

Revenues at 45 percent of the firms remained flat or declined compared with a year earlier, compared with 39 percent in 2014, the report said.

“While China remains a top investment priority, fewer companies are increasing their investment levels in China,” the report said.

(Reporting By Matthew Miller and Michael Martina; editing by Ralph Boulton)

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