Chinese Slowdown Hits U.S. Companies

American companies are feeling the slowdown in China.

A new survey from the US-China Business Council, a nonprofit group whose members do business with China, finds that 17% of firms expect falling revenues in their China operations this year. One-fifth say they plan to cut staffing resources for their Chinese operations.

The world's second-largest economy has had a rocky year, and sudden drops in the value of China's currency have roiled global markets. The Chinese government has ramped up stimulus efforts, but worries about growth and the value of the yuan remain.

As a result, U.S.-based companies' previously rosy outlook on the country seems to be softening. The council's survey of 119 firms found that nearly three-quarters have an optimistic or somewhat optimistic take on the coming five years, the lowest share recorded in the past decade. Firms say they are concerned about the political and regulatory environment, decelerating domestic market growth and rising competition and costs.

More than a third—35%—of companies said the profitability of their Chinese business is down year over year. In 2015, 30% of companies said their profitability had dropped; the year prior it was 27%.

Among firms that have recently changed plans in China, Wal-Mart Stores Inc. opted to strike a deal for a partnership with one of the country's largest e-commerce firms, deciding against pursuing the market on its own. Ford Motor Co. has also been facing pressure from domestic rivals there.

The council's survey, conducted in May and June, showed some bright spots. Just 10% of companies said they were pessimistic about China, and two-thirds said they expect continued revenue growth in their China business. And 90% of firms polled said their operations in the country are profitable, up from 85% who reported profitability in 2015.

Some 15% of companies said they were actively cutting back or halting investment in China, citing increasing restrictions and better prospects elsewhere.

Write to Rachel Feintzeig at [e-mail]

(END) Dow Jones Newswires

August 30, 2016 11:55 ET (15:55 GMT)

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