Trade war tariffs imposed by China and the United States have had a negative impact on “about half” of the businesses in southern China, according to a new report. Chinese, American and other foreign firms have all been affected, according to the special report on the state of business released on Monday by the American Chamber of Commerce in South China which surveyed 240 firms. American companies operating in southern China continue to report being hurt the most as a result of the US and Chinese tariffs, with 54 per cent claiming to have lost market share to competitors from other countries, compared to 33 per cent of Chinese corporate respondents and 20 per cent of companies from other countries. Of those companies surveyed, 19 per cent said the impact from US tariffs on their business was strongly negative, while 31 per cent said the impact was slightly negative. A total of 13 per cent of respondents said the impact from Chinese tariffs was strongly negative, while 28 per cent said that the impact was slightly negative. The survey of the 240 firms, of which 38 per cent were Chinese companies, 36 per cent were wholly foreign-owned companies and 13 per cent were joint ventures, was conducted soon after the US and China announced a 90-day tariff truce on December 1 as President Xi Jinping and US counterpart Donald Trump met in Argentina. On Sunday, Trump delayed the application of the additional tariffs on Chinese imports, citing “substantial progress” in talks in Washington with a team led by Vice-Premier Liu He. “Our company was among the surveyed firms that put a hold on investment in the mainland market last year,” said Tim Wen, president of the American Wine Import Association. “But our confidence has been fully restored, especially seeing the positive signal that Trump will delay extra tariffs due to substantial progress in talks with Beijing.” US must be ‘careful’ in demanding stable Chinese yuan to end trade war The primary business focus of 76 per cent of the American companies surveyed was providing goods or services to the domestic Chinese market, while only 24 per cent focused primarily on manufacturing for export. During the 90-day truce, 27 per cent of the respondents said they had rushed to deliver orders from the US ahead of the possibility that the tariff rate would be raised on March 2. A total of 20 per cent said they delayed fulfilling orders from the US, which accounted for 20 to 30 per cent of their annual sales. About 44 per cent of the foreign-owned companies and 30 per cent of Chinese firms surveyed said that they have shifted some investment from China to other parts of the world, with Vietnam and Thailand the top two alternatives. Rising operational costs in China was cited as the main reason for shifting some investment overseas, followed by an increase of available capital, uncertainly of market prospects, the fluctuation of the yuan exchange rate and market access barriers and investment restrictions. About 65 per cent of corporate respondents said they would expand their business in China and internationally to offset the impact of the trade war, while 51 per cent said they would reduce import and export trade with the US. Of Chinese firms surveyed, 45 per cent said they would adjust their supply chains to source components and assembly outside the US. Billionaire’s warning: long, cold winter is coming for China’s private economy Foreign companies said that a large portion of problems they face in China are not related to central government policies, but rather to unfair treatment by low-level municipal governments. American Chamber of Commerce in South China president Harley Seyedin said this was due to the fact there is rarely a proper channel or venue where a foreign firm can get a fair hearing and resolution according to the rule of law. Seyedin added that very few channels exist where foreign companies can seek arbitration outside the control and influence of the low-level municipal government, concerns which have been echoed by private entrepreneurs in China. In December, the Harmony Club, a group of about 150 tycoons mostly based in Shenzhen, who directly and indirectly control more than 70 listed companies and 3,000 corporate entities, highlighted that the main worry among the club’s membership was the ability of some local government officials to halt or even reverse the commitments made in the past to private firms. Some members reported suffering large losses due to inaction or abuse of office by some local government officials. Despite the continued problems foreign firms face doing business in China, Seyedin was optimistic that US and Chinese negotiators would reach a trade deal in coming months. He also insisted that for many products exported to the US, there is no alternative to producing them in China. “We are positive,” Seyedin said. “I think much of the hardest issues have already been negotiated and discussed. I personally expect, in the coming several months, there would be an agreement. “There will probably be some issues that remain open, but not result in further actions by either country. The future is going to be good, and it has to be good.” How has the cherry been able to avoid China’s economic slowdown? Seyedin insisted that American buyers will have to continue to purchase goods produced in China, either hi-tech or low-tech, because no other country in the world can provide the quality of products, supply chains and highly trained employees. “It would be very difficult and would take many long years [for most firms to shift production to another country]”, he said. Scott Liang, president of Apex Tools and Orthopedics, said that his firm had set up a new factory in Suzhou in Jiangsu province last year and is planning to invest in one more factory in Guangzhou to meet the demand of new buyers in the US. This year Apex will become the new supplier for an American company that is planning to order about US$9 million worth of medical instruments made in China, he said. “This is a very positive signal for us to invest in the mainland in the long term,” Liang said.