The Edge - Volume One

Figure 6: Contribution of nominal GDP Mainland China and the U.S. (2017)

Contribution to proportion in GDP in China

60%

50%

40%

30%

20%

10%

0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

End the uncertainty Current tensions have thrown another source of economic volatility into the mix. Generally, occupiers, developers, investors and owners of real estate are opposed to tariffs as it is expected to increase the cost of doing business. Further, the uncertainty created by the trade dispute makes it difficult to strategically plan. This is of particular concern for U.S. companies currently doing business in China. In fact, looking at some results from a recent 2018 survey by the American Chamber of Commerce in Shanghai, retaliatory use of trade tariffs was backed by only 8.5 percent of respondents versus 69 percent who were opposed. One concern is that it could impact the profitability of U.S. businesses operating in China. In more detail, 76.5 percent of U.S. companies said they were profitable with 83 percent of manufacturers stating they were making money in Mainland China (Figure 7). Additionally, in a later Chamber survey in September, more than 50 percent of surveyed U.S. companies doing business in China said the practical impact of combined tariffs would eat into profits. Many companies also suggested this would result in higher production costs and a decrease in demand for their products. Certainly, both U.S. and Chinese companies doing business in Mainland China would like to avoid a full-blown trade war in the future through greater business transparency and an end to the tit-for-tat dynamic that is unfolding at present. A return to freer trade would undoubtedly cause trade to pick up and office market demand to increase in Mainland China.

Personal consumption expenditure Net exports of goods and services

Gross investment

Contribution to proportion in GDP in U.S.

100%

80%

60%

40%

20%

0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

-20%

Personal consumption expenditure Net exports of goods and services

Gross investment

Source: China Statistics Bureau, U.S. Census Bureau, U.S. Bureau of Economic Analysis, Cushman & Wakefield Research

Figure 7: Business performance of U.S. companies doing business in Mainland China (2011-2017)

Performance

90%

77% 77%

80%

70%

60%

57%

50%

40%

2011

2012 2013 2014 2015 2016 2017

Revenue up

Profitable

Operating margins up

Source: The American Chamber of Commerce in Shanghai, Cushman & Wakefield Research

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