CGCC 2024 Annual Business Survey Report on Chinese Enterprises in the U.S.
About the Survey
Throughout 2023, U.S.-China relations remained strained, characterized by increased tariffs on specific goods imported from China, stricter export controls in high-tech fields, and heightened scrutiny of mergers and acquisitions involving Chinese entities. Nevertheless, diplomatic and business exchanges persisted, exemplified by the meeting between Chinese President Xi Jinping and U.S. President Joe Biden in San Francisco in November 2023. These engagements indicated ongoing efforts to seek avenues for consensus.
Against this backdrop of geopolitical and economic uncertainty, the CGCC’s Annual Business Survey on Chinese Enterprises in the U.S. entered its 11th year. Our survey, conducted amidst this mixed domestic economic recovery and dynamic U.S.-China bilateral relationship, focused on three major topics to capture the overall sentiments of Chinese enterprises in the U.S.
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Surveyed companies felt the business environment in the US has been deteriorating while assessing some dimensions, including labor, infrastructure, and ESG, improved.
1.
Overall Business Environment
Over 60% of the surveyed companies reported a deteriorating environment; 27% did not perceive any significant change; only 13% noted a slight improvement compared to the previous year.
How has the US Investment and Business Environment Changed in 2023 for the Respondents Overall
2.
Business Environment Assessment by Dimensions
- The overall assessment of the business environment in the US deteriorated. Compared to the 2022 results, the 2023 findings reveal a notable absence of “very satisfied” feedback across multiple evaluation dimensions.
- Notably, there was a significant improvement in satisfaction levels regarding “labor and talent”, with a decrease in “unsatisfied” feedback and an increase in “satisfied” feedback compared to the previous year. Also, the proportion of “very dissatisfied/unsatisfied” attitudes in the areas of infrastructure and environment, society, and corporate governance decreased.
Comparison of Surveyed Companies’ Evaluation of the U.S. Investment and Business Environment
in 2022-2023
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Declining investment, revenue, and profitability reflected such deterioration in the business environment. Nevertheless, the non-essential consumer goods industry and some companies in other industries stood out with a resilient performance in 2023.
3.
Investment
- There was a resurgence in the proportion of reports on decreased investment. The proportion of decreased investment increased to 22% in 2023, the second-highest in the past six years. Conversely, the combined share of “investment increased by 0-10%” and “investment increased by 10% or more” showed a decline in 2023, marking the lowest level since the pandemic.
- Non-essential consumer goods emerged as a rare bright spot, with 13% of firms indicating modest investment growth of up to 10%, and 25% reporting significant growth exceeding 10%, in a challenging environment.
Trends in Investment in US Business by Surveyed Companies from 2018 to 2023
Distribution of Changes by Industry in 2023
4.
Annual Revenue
- The trend of how surveyed enterprises’ annual revenue changed marks a notable shift from the strong rebound year seen in 2021. The proportion of companies with revenue increases of more than 20% significantly shrank to 7%. Simultaneously, the proportion of companies experiencing declining revenues increased, particularly in the category of more significant declines (≥20%), which rose from 13% in 2022 to 21% in 2023.
- The real estate sector faced the most substantial revenue decline, followed by industrials and financials, while the non-essential consumer goods industry demonstrated resilience, with 63% of companies reporting revenue growth.
- While the real estate and industrial sectors face pronounced challenges, a noteworthy proportion of companies in these industries have managed revenue growth despite some reporting slight declines.
How the Annual Revenue of the Surveyed Companies’ Business in the United States Will Change from 2018 to 2023 Compared with the Previous Year (Left), and the Distribution Comparison of Different Industries in 2023 (Right)
5.
Profitability
- The change in profit margin for surveyed enterprises in 2023 closely mirrors that of 2020, during the onset of the pandemic. Following a slight easing in 2021 and 2022, the proportion of companies experiencing a decrease in their EBIT margin by 5 percentage points or more, as well as those with a decrease of 0-5 percentage points, rose again to 27% and 22% in 2023. Conversely, the number of companies reporting an increase of 0-5 percentage points and 5 percentage points or more dropped significantly to 15% and 2%, marking the lowest value post-pandemic.
- Financial, industrial, real estate and material industries faced similar challenges in profitability. while 50% of companies in the non-essential consumer goods industry achieved growth within 5 percentage points.
How the EBIT Margins of the Surveyed Companies’ U.S. Operations Change from 2018 to 2023 Compared to the Previous Year
How They are Distributed by Industry in 2023
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Despite the challenges, surveyed companies maintain their expectations for revenue and investment in 2024, similar to those in 2021-2023. Notably, the non-essential consumer goods industry showed the strongest optimism.
6.
Revenue Forecast
- The distribution of survey results over the past four years has exhibited striking similarity, indicating a relatively stable overall tone in surveyed companies’ expectations for revenue changes post-2020. Overall, in 2023, 43% of companies express optimism, 39% remain neutral, and 18% harbor pessimistic views.
- The nonessential consumer goods industry exhibited the strongest optimism, with half of the companies anticipating revenue growth of 0-20%, and a quarter expecting an increase of more than 20%.
Revenue Trends of the Surveyed Companies in the Next Two Years, 2018-2023 (Left), and Distribution Comparison of Different Industries in 2023 (Right)
7.
Investment Plan
- The assessment of investment slowdown has largely stabilized over the past four years, while the proportion of companies optimistic about investment growth continues to increase. Subsequent to 2020, the proportion of survey responses expressing bearish sentiments towards future investment remained at 11%, 14%, and 13%. The overall proportion of respondents expecting an increase in investment has slightly risen from 2021 to 2023 to 26%, 28%, and 29%.
- The nonessential consumer goods industry demonstrated the strongest optimism, with a rate of 51%, of which 38% anticipated an increase in investment of more than 10%, close to 40% of the industry total.
How the Investment of the Surveyed Companies in Their US Business Will Change in the Next Year from 2018 to 2023
The Distribution Comparison of Different Industries
in 2023
Recommendations
For Existing Chinese Companies in the U.S.
Prioritize building/enhancing internal capabilities by identifying and leveraging the structural and comparative advantages within your industry, to cope with external challenges.
Foster communication to learn from the best practices across industries; leverage technological innovations, the pioneering AI technologies for instance, and talents available in the U.S. to achieve better integration and growth.
Align the business logic/operations with the consumption-driven nature of the U.S. economy.
Fully leverage advanced professional services in the U.S. in critical areas such as strategy, finance, legal, and human resources; invest in brand building to integrate more effectively into the competitive landscape.
For New Chinese Companies in the U.S.
Anticipate and strategically plan for a complex and challenging macroeconomic environment, while staying confident about the U.S. market.
Utilize the advantages offered by external professional services, including access to cutting-edge information, talents, and industry-specific services. Prepare as comprehensively as possible for the market entry.
Promote talent localization to enhance operational effectiveness. Establish a forward-looking brand image that aligns with the product offerings and marketing strategies.
Align the business logic/operations with the consumption-driven nature of the U.S. economy. Develop clear business growth strategies that align with consumer behaviors and market trends.
Connect and communicate with successful Chinese companies in the U.S. through social/service networks, such as chambers of commerce to learn from their experiences, and to gain a comprehensive understanding of the U.S. business environment.
Media Coverage
