While the recent US-China trade dispute and the Covid-19 outbreak have greatly affected US companies in China by disrupting their supply chains and reducing demand for their goods and services, a majority of them say they have no plans to relocate operations or sourcing outside of China, according to two recent surveys.  

The surveys – one conducted last October on the US-China trade dispute’s impact on the supply chains of US companies operating in China, and the other conducted in March on a subset of these companies focusing on the impact of the Covid-19 outbreak on their production capabilities – were undertaken by PwC China in partnership with AmCham China and AmCham Shanghai.

The overwhelming majority of companies surveyed have had a presence in China for at least a decade and have nationwide operations.

The first survey of 70 companies shows that 90% of US companies’ supply chains were affected by the US-China trade dispute, mainly through diversification of supply base, risk management, and cost control.

However, the adoption of “in China for China” manufacturing and sourcing strategies has mitigated some of these impacts. Most respondents expected continued healthy commercial relations between the US and China, and looked forward to potential improvements in the regulatory environment as a result of the trade disputes.  

The second survey of 25 companies shows a focus on returning to full production after the Covid-19 outbreak, with concerns shifting from factory closures to logistics, and 68% of respondents seeing a return to normal activities in China within the next three months.

Due to the rapid spread of the virus and the ensuing operational constraints, around half of the respondents said they were running below normal capacity, with 68% reporting that demand for products and services was below normal.

Logistics-related challenges were the greatest anticipated challenge over the coming month, while resources impacting capacity was the next most critical challenge. In the short term, over 70% of companies say they have no plans yet to relocate production and supply chain operations or sourcing outside of China due to the virus.

In fact, twice as many (24% versus 12%) planned to shift sourcing as were planning to shift production. Meanwhile, one in five respondents said they believed that Covid-19 would accelerate the process of economic decoupling.

“In contrast to some global narratives, our China-based data suggests that the majority of our members will not be packing up and leaving China anytime soon,” says Alan Beebe, AmCham China president. “Of course, certain companies in certain industries may diversify away from China or even expand manufacturing operations in the US given the current climate. But this is a costly, time-consuming, and largely irreversible process.