Confidence of US firms in China wanes as record numbers cut investments amid hardships

American firms in China appear to have soured on the business climate and prospects, an annual survey by a leading business chamber has found. But potential investments are seen “waiting at China’s door”, despite the nation’s patchy economic recovery complicated by geopolitical fickleness in a presidential election year for the United States.

The China Business Climate Report, compiled by the American Chamber of Commerce in Shanghai based on the feedback from 306 members in Shanghai and elsewhere in eastern China, showed on Thursday that their confidence has continued to wane.

This is marked by all-time-low metrics on performance and perception compared with previous years’ findings: 66 per cent of the respondents were profitable in 2023, down from 68 per cent in 2022; while only 47 per cent remained optimistic about China’s five-year outlook in 2023, down from 52 per cent a year earlier.

Only 13 per cent of them still ranked China as their top investment choice, compared with 17 per cent in 2022, while a record-high 25 per cent of respondents cut investment in the country last year.

American businesses see the strained ties between the two countries or broader geostrategic tensions as the biggest challenge to both their China operations and China’s potential growth, on top of concerns over China’s economic slowdown, according to the report.

“Many members have spent decades building their brands in China and must now manage a changing environment that may require them to make tough near-term decisions as they adjust to navigate new markets and geopolitical dynamics,” said Allan Gabor, chair of AmCham Shanghai.