Volatility in the US-China trade relationship has dragged optimism in the business environment, headquarter prioritisation of the China market and future revenue expectations to record lows, according to the American Chamber of Commerce (AmCham) Shanghai’s 2025 China Business Report.

However, China’s efforts to demonstrate its continued openness to global business have yielded significant improvements in metrics related to the regulatory environment, it noted.

Seventy-one per cent of respondents were profitable in 2024, an improvement from 2023’s record low of 66 per cent. Profitability varied widely by sector; 80 per cent of manufacturers and 69 per cent of retailers were profitable.

Volatility in US-China trade ties has dragged optimism in the business environment, headquarter prioritisation of the China market and future revenue expectations to record lows, a survey by AmCham Shanghai found.
Just 45 per cent of respondents expect revenue to rise in 2025.
Forty-one per cent of them are optimistic about the five-year business outlook, with the rate lowest for manufacturers.

Fifty-seven per cent of respondents saw higher revenue in 2024 than in 2023, up from 50 per cent in the previous survey.

Sixty-four per cent of companies expect new US-China tariffs to drag on their 2025 revenue performance. As a result, just 45 per cent anticipate revenue to increase this year. This would be a record low if realised.

For the fourth consecutive year, the rate of respondents optimistic about the five-year business outlook in China hit another historic low. Now, 41 per cent of respondents express any optimism, with the rate lowest for manufacturers (36 per cent) and highest for retailers (51 per cent).

Twelve per cent of respondents ranked China as their headquarters’ top investment destination, also the lowest in the survey’s history.

Forty-eight per cent of respondents said that the regulatory environment was transparent, a 13-percentage point (pp) jump from last year. When asked about obstacles from regulatory challenges, members reported less hindrance across all options.

Over a third of respondents say that Chinese government policies and regulations toward foreign companies have improved in the past few years, 4 pp higher than 2024. Accordingly, 41 per cent say they are confident in China opening up further, a jump from 22 per cent last year.

Members continued to rank the US-China relationship or geopolitical tensions more broadly as the biggest challenge to their China operations and to China’s economic growth. Trade turbulence is weighing on willingness to invest in China and leading firms to double down on risk mitigation strategies, a release from the chamber said.

Forty-eight per cent of respondents urged the US government to completely remove all tariffs and non-tariff barriers on Chinese goods. Another 33 per cent want the removal of April’s reciprocal tariffs and other additional tariffs like the 20-per cent fentanyl tariff.

Members also oppose retaliatory duties, with 42 per cent calling on the Chinese government to remove all tariffs and non-tariff barriers on US imports and an additional 34 per cent hoping for a return to the most favoured nation rate.

If the US revokes China’s Permanent Normal Trade Relations status, 69 per cent of members anticipate negative effects. Companies in the manufacturing sector would bear the brunt, with 78 per cent expecting adverse effects compared to 59 per cent for retail.

Twenty-three per cent increased investments while a record-high 26 per cent cut investments in China. This year, 22 per cent are expecting to raise their China investments and 25 per cent will reduce that.

More companies are limiting their investment exposure to China in response to the changing geopolitical and economic situation; only 39 per cent will not have any China investment limits, down from 45 per cent last year and 50 per cent in 2023.

Companies are shock-proofing supply chains and bifurcating US and non-US strategies in response to global trade tensions. Of those with supply chains, nearly half are making significant adjustments in response to recent tariffs by shifting the sources of US-bound products or building in redundancy.

In the past year, 47 per cent of companies have redirected planned investments away from China, the highest level since this question was first asked in 2017. Southeast Asia remains the top destination for rerouted investment as well as for operations that are moved out of China.

Fibre2Fashion News Desk (DS)