For Immediate Release
Mar 1, 2022
For additional information, please contact:
Ms. Charlene Chen
The American Chamber of Commerce in South China
Tel: 86-20-8335-1476 ext. 33
In 2021 Twice as Many Companies Reinvested US$250 Million or More than Budgeted
GUANGZHOU, CHINA – March 1, 2022 – The American Chamber of Commerce in South China (AmCham South China) today released its 2022 White Paper on the Business Environment in China and 2022 Special Report on the State of Business in South China. The release was attended by over 300 government officials, business executives and members of media including over 40 foreign consulates mostly represented by their consuls general. Both publications can be downloaded free of charge from http://www.amcham-southchina.org/amcham/static/publications/publications.jsp
The 600-page bilingual White Paper on the Business Environment in China, now in its 15th year, is a well-structured and extensively-researched volume which presents a multifaceted and unbiased account of the business environment in China. The 147-page bilingual Special Report on the State of the Business in South China, our 18th such endeavor, provides a comprehensive and quantitative analysis of the business community and valuable insights into the development trends in South China. This year 230 companies were studied. Both publications are researched and produced independently by AmCham South China and do not represent the opinions of the US or any other government or organization. AmCham South China does not receive any funds from any government in the production of these publications.
2021 was an extraordinary and bittersweet year. China stood out for its economic resilience in the face of unprecedented global changes and a once-in-a-century pandemic. Its GDP grew by 8.1% to 114 trillion yuan (US$ 18 trillion) in 2021, its fastest pace in a decade, which showcased its strong growth momentum and enormous market potential. Foreign companies are increasingly venturing into China, looking for business opportunities there. According to the 2022 Special Report on the State of Business in South China, the actual reinvestment in China in 2021 experienced a year-on-year growth of 5%, closing the gap to the pre-pandemic level. 80% of the American companies reinvested last year. Noticeably, in 2021, twice as many companies reinvested US$250 million or more than they had budgeted, which is expected to result in GDP growth in the second half of 2024.
However, a rising demand for electricity and soaring coal and gas prices interacted with strict climate targets, which left China exposed to a power crunch in 2021. In AmCham South China’s first study on the power shortage conducted in 2021 between October 8 and 12, 21% of the impacted companies experienced more than 40% reduction in production capacity due to the power rationing policy, but the overall picture looked much more benign in the second study with the figure dropping to only 3%. Nearly half of the studied companies believe that the shortages problem will be resolved by the end of the first quarter of 2022.
Most companies show greater optimism for an improved US-China bilateral relation in 2022. Compared with a year earlier, strong negative impacts brought by US and Chinese tariffs on companies eased in 2021. Dr. Harley Seyedin, President of AmCham South China, the winner of 2017 Oslo Business for Peace Award (together with Elon Musk, Durreen Shahnaz and Murad Al-Katib), which is awarded by an Award Committee of Nobel Laureates in Peace and Economics, said, “Diplomatic relations between the US and China have endured through almost half a century. As COVID-19 enters its third year, both sides need to stand firmly together at this crucial juncture to address common difficulties facing humanity including climate change, the pandemic, hunger and poverty.” Dr. Seyedin also said, “I am hopeful that the nomination of highly credentialled and experienced Nicolas Burns as US ambassador to China will contribute to the continuity, stability and sustainability of this critical relationship.”
Key Takeaways of the 2022 White Paper on the Business Environment in China and the 2022 Special Report on the State of Business in South China:
l 2021 saw an increase in headcount by half of the participating companies. Strong confidence can be found in the employment expansion plan with 57% of companies reporting to augment their headcounts significantly or slightly in 2022.
l Companies’ share of global annual revenue from China went through a modest but mostly positive fluctuation in comparison with previous four years. Approximately half of the companies obtained over 30% of revenue from China. 63% of the companies found their revenue from China increase significantly or slightly in 2021 which returned to pre-COVID levels.
l Around 82% of the companies have already achieved profitability in China in 2021, a slight reduction compared to the last three years. Nevertheless, 56% of them reported to have met their budget expectations, a 7-percentage point uptick in comparison with the previous year.
l Fewer companies expect to reach profitability in a short period of time. An unprecedented situation can be noticed in this year’s report in which up to 12% of the companies believe that it will take longer than six years to become profitable.
l Most companies still take a sanguine view of the business outlook in China, though the percentage dropped by 7% from a year earlier to 77%.
l China is enjoying the highest popularity of all time as one of the preferred investment destinations by an overwhelming majority of the studied companies.
l About three-fifths of the companies considered their overall return on investment (ROI) in China in 2021 to be higher than their global ROI.
l Companies still have huge faith in the Chinese market, 77% of which chose to keep their investment in China in 2021. Not a single company showed intention to leave China completely. Noticeably, European and North American markets have greater attractions for a limited amount of shifted reinvestment this year.
l Companies still take a strong interest in reinvesting in China despite its economic slowdown. More than 70% have reinvestment plans for 2022, including 76% of American companies. The percentage of companies with budgeted reinvestment of over US$250 million in China increases from 5% in 2021 to 10% in 2022.
l It is estimated that companies will reserve US$26.5 billion from profits for reinvestment in China in 2022 and the next three to five years, a dramatic increase of 45% compared to the previous year.
l Roughly 72% of companies intend to expand in China over the next three years, 7% up from last year.
l 2021 marks the fifth consecutive year that Guangzhou remains the top reinvestment destination in China. Shenzhen, Shanghai and Beijing are also ranked as the most favored reinvestment cities by the studied companies.
l The business environment in South China shows an upward spiral of improvement in recent years.
2022 is a critical year for further implementing the 14th Five-Year Plan and comprehensively promoting the rural revitalization strategy. “In the past decade, we, at AmCham South China have raised over 5,172,000 RMB in cash that literally saved the lives of 224 orphaned children by paying for their immediate life-saving medical procedures. We have also raised 12,945,811 RMB in in-kind donations which have raised four impoverished villages above the poverty line. I am deeply grateful to our over 2,300 members who have been actively involved in the philanthropic endeavors.” said Dr. Harley Seyedin. He added that many companies are still affected by visa and travel restrictions caused by the pandemic. The Chamber which conducted extensive lobbying was recently informed that PU letters for qualified expats and their family members can now be obtained through application at local district offices. The Chamber is happy to have achieved this milestone.
About White Paper on the Business Environment in China and Special Report on the State of Business in South China
The White Paper on the Business Environment in China offers a summary of China’s impressive accomplishments since China’s “opening-up” and examines the key influences on the business environment in present-day China, such as national policy initiatives and the global economic crisis.
The Special Report on the State of Business in South China is a quantitative study of the business environment, conducted for consecutive years by AmCham South China. Each year, AmCham’s member and non-member companies participate in AmCham’s State of Business study, results of which will be garnered and edited into a separate publication.
Both documents can be downloaded free of charge from the chamber’s website at www.amcham-southchina.org/amcham/static/publications/publications.jsp.
About the American Chamber of Commerce in South China
The American Chamber of Commerce in South China (AmCham South China) is a non-partisan, non-profit organization dedicated to facilitating bilateral trade between the United States and the People’s Republic of China. Accredited in 1995 by the US Chamber of Commerce in Washington DC, AmCham South China represents more than 2,300 corporate and individual members, is governed by a fully-independent Board of Governors elected from its membership, and provides dynamic, on-the-ground support for American and international companies doing business in South China. Over the past ten years, AmCham South China has hosted on average each year more than 10,000 business executives and government leaders from around the world at its briefings, seminars, committee meetings and social gatherings. All AmChams in China are independently governed and represent member companies in their respective regions.