Asia-Pacific executives see improving US business climate as some of the fire goes out of the China trade dispute

A majority of chief financial officers at companies in the Asia-Pacific region are optimistic that the business environment in the US will improve for foreign firms, as economic fundamentals prevail over current trade frictions with China, according to a recent survey.

The survey of 500 CFOs in 30 countries by Zurich Insurance found that 62 per cent of Asian company CFOs saw an improvement. In contrast, less than half of European CFOs expressed confidence that the US market would get better for foreign companies, while Chinese company CFOs were more optimistic over US immigration policies and the hiring outlook than their Japanese counterparts.

“While there are some tensions in the US-China trade relationship, the introduction of tariffs has been relatively focused and limited in the context of the expansive US-China relationship,” said Peter Hirs, head of finance, Asia-Pacific, at Zurich Insurance. 

“While there is a fear that tensions could further escalate, the majority of CFOs believe that in the end, sound economic fundamentals will drive both US and Chinese trade behaviour. The US and China have been great beneficiaries from past development and both countries agree that the current trade imbalance is unhealthy.”

The US administration in March threatened to impose up to US$150 billion worth of sanctions on Chinese goods in an attempt to reduce the annual US$335 billion trade deficit between the US and China. Since then the two sides have sparred over trade matters, before the US put the tariffs on hold and China committed to importing more US energy and agricultural products, and both sides agreed to more talks.

China-US trade war truce shows where Xi and Trump are weak

In addition, the economic outlook for the US is positive, with unemployment at its lowest in 17 years, a strengthening dollar and manufacturing levels at their highest since September 2014, according to government statistics.

“Despite the so-called trade war … it seems both sides are getting their own bargains. People are steadily becoming more optimistic,” said Jeffrey Chan, a founding partner of Hong Kong financial services firm Oriental Patron Financial Group. 

“Lately, the influx of US dollars back to the US due to the [Hong Kong Monetary Authority’s] defence of the Hong Kong dollar indicates the US has a stronger economy relative to the EU. The US is also more likely to increase interest rates during the rest of this year compared to other parts of world.”

However, Zurich’s Hirs noted that CFOs in the survey were conscious of the fragility of the current geopolitical environment, and had been taken by surprise by the US tariffs decision. As a result, there was an increased awareness that the trade dispute could escalate, he said.

Separately, CFOs in the survey pointed to cybersecurity threats, including hacking, data loss and business disruption from power failures as other areas of concern.

“This is especially the case in China where technological levels are extremely high and where companies realise the importance of data as a precious asset,” he said.

As a result, demand for insurance to protect against cyber risks has soared, but the insurance industry is still working on developing products since many of the risks cannot be properly quantified, according to Hirs.