Business Confidence Falls Amid Rising US-China Strains

The confidence of U.S. businesses in China has dwindled due to political tensions, intense domestic competition, and China’s slowing economic growth, a recent survey reveals. Only 41% of U.S. firms are optimistic about their five-year outlook in China, the lowest since the American Chamber of Commerce in Shanghai (AmCham Shanghai) started the annual China Business Report in 1999. This marks a six-percentage-point decline from the previous year.

The survey, conducted among 254 member companies across various industries, was carried out shortly after U.S. President Donald Trump announced new tariffs, which escalated trade tensions with China. Although a 90-day pause temporarily lowered tariff levels, geopolitics remains a major concern. Sixty-six per cent of respondents cited U.S.-China tensions as their top challenge over the next three to five years.

Eric Zheng, president of AmCham Shanghai, expressed cautious optimism regarding the pause, highlighting that unresolved issues still exist and introduce uncertainty for business planning. He hopes the two governments will soon negotiate a deal.

Meanwhile, increasing domestic competition within China has emerged as the second-largest challenge, overtaking the country’s economic slowdown. Firm profitability has improved, with 71% reporting profits and 57% seeing revenue growth up from 50% last year. Nonetheless, only 45% of companies anticipate revenue growth in 2025, a record low if it occurs, and 64% believe tariffs will harm this year’s revenue.

On a more optimistic note, perceptions of China’s regulatory environment have improved, with 48% of firms viewing it as transparent, a 13-percentage-point increase, while 41% believe it will become more open, up from 22%. Despite these improvements, only 12% of companies rank China as their top investment destination, a historic low. The report also notes that 47% of firms have diverted investments originally planned for China, primarily towards Southeast Asia.

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In summary, U.S. businesses are increasingly wary of China, driven by geopolitical tensions and economic uncertainties, even as some positive shifts in regulatory perceptions emerge.