Most small and medium-sized companies operating in China’s south plan to stay in the country despite concerns that frictions between Beijing and Washington are likely to grow this year, according to a new survey from the American Chamber of Commerce in South China. Although companies are slightly more positive about the relationship in 2021 than previous years, some 86 per cent of businesses believed the US-China trade dispute is “very likely” or “probably” likely to expand, said the special report on the state of business in South China, one of the country’s main growth engines. Still, 95 per cent of firms said they had no appetite to decouple from the country, even as many business leaders expect the Biden administration to maintain a tough stance when it comes to hi-tech equipment and components. The survey, conducted between September 23 and December 22 last year, canvassed the views of 191 companies mostly from the United States or mainland China, with 12 per cent from Europe and the remaining 18 per cent come from Japan, Korea, Southeast Asia or Oceania. There is a general consensus within the business community that the Biden administration will view the US-China relationip through a different looking glass Dr Harley Seyedin “There is a general consensus within the business community that the Biden administration will view the US-China relationship through a different looking glass,” Dr Harley Seyedin, president of AmCham in South China, said in a statement. “I predict a rather long honeymoon period within which the two sides will have an opportunity to examine their differences, evaluate what is important to each side and begin friendly and mutually respectful dialogue.” Earlier this month US president Joe Biden announced a new China task force under the Department of Defence to review US strategy towards the country and he has said Washington would not immediately remove tariffs on Chinese goods. The two powers remain far apart on issues like trade, human rights, Taiwan , Hong Kong and Xinjiang . China’s robotics revolution falls behind target as technology gap with rivals Japan, Germany persists More than half of the companies that took part in the survey claimed US tariffs have had a negative impact on their business – with US companies hurting the most – although that represented an improvement on the previous two years. China is still the top spot for investment for 55 per cent of businesses, up 10 per cent on 2019, but its appeal varies between industries. More than 60 per cent consumption products and services companies chose China as their number one investment priority, as did 59 per cent professional services companies. However, only 40 per cent of manufacturing firms chose China as the top destination, a pattern that was similar to last year’s result and showed the world’s second biggest economy was losing its attraction as a manufacturing base, AmCham said. The trade war is not the only issue weighing on businesses in South China. Three quarters of respondents said their operations have been impacted by visa and travel restrictions caused by the Covid-19 pandemic, both in China and the US. The effect of travel restrictions in China included the cancellation of international business travel, events and meetings, as well as the absence of management due to executives being unable to return. With the pandemic causing the deepest global recession in decades, reinvestment in China last year also took a hit, according to the survey. What is the US-China trade war? The number of very large planned reinvestments worth US$250 million or more dropped to the lowest level in several years, representing a 82 per cent drop year on year for all foreign companies and 65 per cent cut for US companies. The survey suggested that the reduction in large investment plans is connected to the lower number of foreign executives in China this year. “We predict that this will severely impact China’s manufacturing output two to three years from now,” the survey said. While most companies said they would expand in China, the share of companies that planned to increase their presence in the next three years dropped to new low compared to the past five years because of the pandemic, the survey found.