SHANGHAI: Political tensions, fierce domestic competition and China‘s slowing economic growth are sapping the confidence of US businesses in the country, with optimism about their five-year outlook falling to a record low, a survey showed.
Only 41 per cent of US firms were optimistic about their five-year China business outlook, a drop of six percentage points from last year, according to the survey published on Wednesday by the American Chamber of Commerce in Shanghai.
This was the weakest level of optimism reported since the AmCham Shanghai Annual China Business Report was introduced in 1999.
The survey of 254 member companies representing a range of industries was conducted just after US President Donald Trump announced his sweeping so-called “Liberation Day” tariffs, which led to a tit-for-tat tariff escalation with China.
A pause in trade hostilities has since temporarily lowered tariff levels.
Geopolitics remains the biggest issue cited by companies, with 66 per cent of respondents saying US-China tensions are the top challenge facing their business over the next three to five years.
“We love this 90-day pause, but the issue is not going away, it’s still here,” said Eric Zheng, president of AmCham Shanghai, adding that the current uncertainty made it difficult for companies to plan for the future.
“Hopefully the two governments will work together to sort out their differences and hopefully there will be a deal soon,” he said.
Domestic competition from rising Chinese players was the second-biggest challenge cited by businesses, overtaking China’s economic slowdown.
The number of profitable firms picked up from last year’s record low, with 71 per cent posting profits. Revenue performance also improved, with 57 per cent of members, up from 50 per cent the year before, achieving year-on-year growth.
That said, only 45 per cent of surveyed members expect revenue to grow in 2025, which would be a record low if it comes to pass. A majority of companies, 64 per cent, expect new US-China tariffs to drag on this year’s revenue.
On a positive note, there was a significant 13-percentage-point uptick from last year – to 48 per cent – in businesses that reported believing China’s regulatory environment is transparent.
The number confident that China’s regulatory environment would open up further rose to 41 per cent from 22 per cent last year.
Only 12 per cent of respondents ranked China as their firms’ top investment destination, another record low in the survey’s history.
In the past year, 47 per cent of companies have redirected investment that had been earmarked for China, the AmCham report said, with Southeast Asia remaining the top pick for rerouting investment.
© New Straits Times Press (M) Bhd
