More than a third of US companies operating in China are to postpone planned investments this year as foreign investment continues to fall amid growing accusations of Chinese state protectionism.

An annual study by the American Chamber of Commerce in China found that 39% of its members are postponing or cancelling planned investments this year, while 21% expect to shrink their workforce in China.


Among the 400 respondents surveyed, 35% expected revenues to decrease in 2009, compared with 13% in last year’s survey.

The research reflects official government figures which show that FDI fell 25.2% to $13.3bn in January and February this year from the same period a year ago. Foreign investment rose by 23.6% in 2008 to $92.4bn and was a critical factor in driving China’s rapid economic growth.

In a move likely to fuel further caution among US multinationals, China’s government rejected what was to be one of the country’s largest foreign takeovers when it blocked Coca-Cola’s planned $2.4bn takeover of Huiyuan Juice, amid accusations of protectionism.

The deal to acquire the country’s leading juice manufacturer was blocked on competition grounds that it would hurt smaller domestic companies as well as limiting consumer choice. But lawyers have criticised the single-page ruling for being short on explanation.

The ruling has not only prompted accusations of protectionism levelled at China’s Ministry of Commerce but it may have an impact on reaction to China’s investments abroad.

China’s state-owned metal group Chinalco has proposed a $19.5bn joint venture with Rio Tinto, the Anglo-Australian miner. Australia’s foreign investment rules have come under similar criticism since they were strengthened last year to highlight national interests and enforce greater scrutiny on investments by state-owned sovereign wealth funds.

Although FDI into China is falling, according to global greenfield investment monitor fDi Intelligence, US investment into China in 2009 represented 36% of all investment into the country during that period.

There have been 23 investment projects from the US into China this year compared with no other source country investing in more than five projects in China in that same period. The investment monitor also showed that US investments represented 28% of the global share of investments into China measured by ­capital expenditure.