TMTPOST--Washington's stricter trade rules on Beijing have strained relations between American and Chinese companies, according to a Washington-based trade association survey released on Friday.

The U.S.-China Business Council said its members have suffered due to prolonged bilateral tensions, which led the White House to implement increased export controls, tariffs, and trade regulations affecting American businesses in China.

Tensions between Beijing and Washington have emerged as a primary worry, with the unpredictable nature of the relationship creating an atmosphere of uncertainty that impacts strategic planning and operational flexibility, the U.S.-China Business Council said in a summary of its summer 2024 survey of companies, conducted in June and July.

“American companies are losing market share as China pours support into domestic innovation programs. A record high proportion of companies have seen their market share in China decline this year, while a record low say their market share is growing,” the association said in the summary. “Intensified competition with domestic firms coincides with expanded industrial policy support, such as subsidies, for Chinese companies,” explained the survey summary.

Adding to this, the stringent trade rules imposed by the U.S. government have not only strained diplomatic ties but have also directly affected business activities. Export controls, tariffs, and a plethora of trade regulations have made it increasingly difficult for American companies to maintain smooth business relations with their Chinese counterparts. This has led to supply chain disruptions and has raised the cost of doing business, thereby affecting the profits of many companies, according to the report.

The report also highlights the inconsistent and unclear policies and enforcement as a significant hurdle. American businesses have expressed concerns over the lack of transparency and the complexity of navigating the Chinese market, which is further exacerbated by rising labor costs and stringent data security regulations. Despite China's assurances of welcoming foreign investment, many U.S. companies still face barriers that hinder them from competing on a level playing field.

The impact of these challenges is far-reaching, affecting not only the profitability of U.S. businesses in China but also their ability to innovate and grow. About half of the companies surveyed expressed concerns about their profitability in the coming year, reflecting a cautious outlook amidst the trade tensions.

The survey summary indicated that China-U.S. relations and associated geopolitical uncertainties continue to be the major challenges for U.S. companies operating in China. However, tensions "seemed to be under more active management" following the meeting between Presidents Xi Jinping and Joe Biden in San Francisco last November.

Half of the respondents experienced lost sales due to "customer uncertainty around continued supply," while one-third reported sales declines attributed to "rising nationalism among Chinese consumers." Additionally, over a quarter of respondents said they were excluded from public bids or tenders because they are a U.S. company.

Despite these issues, the proportion of respondents reporting "harmful" or "severely harmful" effects of U.S.-China relations decreased from 83% last year to 79% this year.

The council, which boasts 270 member companies such as Apple, IBM, and Ford Motor Company, also noted some positive trends in its survey report. It highlighted that the Chinese government has made "improvements" in market access and cross-border data transfer policies and has acknowledged an "urgent need" to enhance consumer spending.

The report also underscores the importance of the upcoming U.S. presidential election, which is seen as a pivotal moment that could shape the future of U.S.-China business relations. The potential for a shift in policy, whether towards further protectionism or a more cooperative approach, will be closely watched by businesses on both sides of the Pacific.

To foster a more conducive business environment, the report recommends that China implement transparent and practical economic policies that treat domestic and foreign entities equally. It also calls for clarity and precision in China's anti-espionage laws to prevent interference with routine business operations.

On the U.S. side, the report advises against unilateral controls that may be ineffective and fail to meet national security and foreign policy goals. Instead, it suggests engaging with Chinese companies to address export control concerns before resorting to sanctions.

The findings of the survey and the ensuing report serve as a call to action for both governments to work towards a more stable and predictable business environment. As the world's two largest economies, the U.S. and China have a shared responsibility to ensure that their actions not only protect their national interests but also support the global economy and the businesses that drive it.