Washington Insider -- Tuesday
China Firms Scale Back Investment in US
Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
Republicans Note Concerns Over WOTUS Redo
House Republicans sent a letter to EPA Administrator Michael Regan and acting Assistant Secretary of the Army for Civil Works Jaime Pinkham outlining concerns with the administration's intention to undo the Trump administration's Navigable Waters Protection Rule.
The EPA on June 9 said it and the U.S. Army Corps of Engineers plan to launch rulemakings to restore the pre-2015 definition of the waters of the United States (WOTUS) under the Clean Water Act.
"We are concerned that the approach the Agencies intend to take in re-vising this important regulation will regress from the clarity provided by the Navigable Waters Protection Rule and will reimpose a vastly overbroad interpretation of federal jurisdiction over waters around the Nation," the lawmakers said.
USDA Raises Food Price Inflation Outlook
Consumer food costs are increasing and USDA has raised its forecast for overall food price inflation and its outlook for food at home (grocery store) and food away from home (restaurant) prices. Overall food price inflation is now seen at 2.5% to 3.5% in 2021, up from their month-ago outlook that food price inflation would be 2% to 3%. Grocery store prices are now seen rising 2% to 3% in 2021 compared with their month-ago outlook that grocery store price would rise 1.5% to 2.5%.
Restaurant prices are now seen up 3% to 4% from 2020 levels, an increase from the prior outlook that they would increase 2.5% to 3.5%.
The updated forecasts also mean that prices are seen rising for all three categories by more than their 20-year average. Those averages are 2.4% for all food prices, 2.8% for restaurant prices, and 2% for grocery store prices.
However, it is important to note that leading up to 2020 and now 2021, consumers saw grocery store prices either increasing at less than the 20-year average or decreasing over the 2015 to 2019.
Washington Insider: China Firms Scale Back Investment in US
Each year, the China General Chamber of Commerce-USA releases a survey of Chinese businesses that operate in the U.S., and this year it showed a decline in their level of investment in the U.S.
About 39% of Chinese companies saw their investment in the U.S. drop so far in 2021, compared with 17% last year, the survey said. It was taken in March and April with a sampling of 183 respondents. Only 12% of the Chinese businesses increased their investment, Bloomberg reported, down from 23% in 2020 and 39% in 2018. The figures from 2018 are notable as that was just ahead of the Trump trade war launched against China in the form of tariffs, etc.
Of course, COVID factored into the situation. "Respondents suggested revenue and profitability suffered in 2020 due to a tougher business environment in the U.S., primarily related to COVID-19," the report said. "The pandemic's impact was negative for most but varied by sector. Expectations on when revenue and profitability will return to pre-pandemic levels vary by sector, as well, but generally, Chinese companies surveyed are somewhat more positive on the near-term economic outlook than they were last year."
But there were other themes running through the data. The Biden administration has not greatly altered the U.S. policy toward China, and in some respects, it perhaps has been tightened compared with the actions from the Trump administration.
And Chinese companies operating in the U.S. have felt these impacts as the report said that 79% said the investment and business environments have worsened, the highest level since at least 2018. One year ago, that level stood at just 55%.
"Chinese companies indicated they continue to adapt to changing U.S. government policies and enforcement priorities at the federal and state levels," the report stated. "After several years of enhancing employee training and working with third-party organizations, Chinese companies reported they are also prioritizing strengthening their compliance systems and procedures to navigate what is perceived to be a complex legal and regulatory environment in the U.S."
Even though there was still a level of optimism with Chinese companies operating in the U.S., the report said that only 43% expected higher revenues over the next two years, down from 57% in 2020 and 63% in 2019. Almost 20% of those surveyed predicted lower sales.
And that outlook has fallen since 2015. In 2015, over 60% viewed the environment positively in the U.S. positively and only 4% held a negative view. "This year, only about a quarter (27%) held positive views, whereas 40% held negative views," the report said.
And they noted things are perhaps a little less certain in terms of U.S. rules and regulations, an interesting observation given the rapid-fire changes in U.S. policy toward China that took place during the Trump administration. "This year, the top compliance challenges faced by surveyed Chinese companies shifted from lack of knowledge on relevant laws and regulations to navigating perceived complicated laws and regulations and potential conflicts between U.S. and Chinese laws and regulations," the report said.
The survey showed lessening levels negative effects of U.S. government policies or positions, with 73% citing tightening work visa authorizations or immigration policies. That level stood at 76% in 2020. High tariffs on Chinese products were cited by 59% in 2021 while that stood at 73% in 2020. Two new options were added for companies, including general economic and trade sanctions where 58% said that was a factor, with 35% citing export controls and 28% cited the Holding Foreign Companies Accountable Act.
Bloomberg pointed out that the Biden administration has been "adding more Chinese firms to blacklists, sending more warships through the Taiwan Strait, barring solar imports from Xinjiang and pressing Beijing on Hong Kong and new investigations into the origin of the COVID-19 pandemic."
But despite those actions, 65% of those surveyed said the year-over-year challenges in conducting business in the U.S. reflected "complex China-U.S. relations." By contrast, that was labeled as a challenge by 74% in 2020 and 75% in 2019.
So we will see. It's interesting that even though little has changed in terms of U.S. policy toward China and some areas have been more restricted, Chinese businesses remain optimistic. Still, this is an area that needs to be watched closely as the China-U.S. relationship unfolds, Washington Insider believes.
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