WASHINGTON (Reuters) – Strict COVID-19 management measures in China have overtaken bitter U.S.-China relations as the highest concern of U.S. firms within the nation, a enterprise foyer mentioned on Monday.

It mentioned greater than half of its companies reported the difficulty as a cause to cancel or delay investments on this planet’s second largest financial system.

“The looming risk that firms will once more be compelled to partially halt operations as a result of lockdowns and the impacts of native controls on client demand have undermined confidence within the enterprise surroundings,” the U.S.-China Enterprise Council (USCBC) mentioned primarily based on an annual survey of 117 member firms.

China’s financial system narrowly prevented contracting within the second quarter as widespread lockdowns and the slumping property sector badly broken client and enterprise confidence.

Dangers nonetheless abound as many Chinese language cities, together with manufacturing hubs and common vacationer spots, imposed lockdown measures in July after contemporary outbreaks of the extra transmissible Omicron variant of the coronavirus had been discovered.

Many of the firms surveyed mentioned detrimental results of Beijing’s COVID measures had been reversible, however 44% mentioned it might “take years to revive enterprise confidence,” USCBC mentioned.

These insurance policies, persevering with U.S.-China tensions, and “vital market entry obstacles” in China regardless of authorities assurances of equal remedy of international firms, have led to “report ranges of pessimism,” affecting firms’ selections about provide chains and future investments, the group mentioned.

Up to now yr, 24% of firms have moved components of their provide chains out of China, in comparison with 14% within the 2021 survey. Optimism in five-year enterprise outlook for China has dropped from 88% in 2013 to 51% in 2022.

Nonetheless “firms overwhelmingly stay worthwhile in China,” USCBC mentioned, with 63% of respondents saying profitability elevated within the final yr.

COVID journey restrictions, cybersecurity guidelines, price will increase, and U.S.-China expertise decoupling had been additionally main issues.

(Reporting by Michael Martina and David Lawder; Modifying Tomasz Janowski)

Copyright 2022 Thomson Reuters.