A record 25 percent of U.S. companies scaled back their investments in China last year, citing concerns about the country’s slowing economic growth.
U.S. companies’ confidence in the Chinese market has plummeted to a record low, a survey by the U.S. Chamber of Commerce in Shanghai shows. Factors such as geopolitical tensions and China’s slowing economic growth are affecting investment strategies.
The
report paints a grim assessment of China’s economy by foreign investors. Only 47 percent of respondents to the chamber’s survey said they are optimistic about the business outlook in China over the next five years—the lowest level since the chamber began conducting the survey 25 years ago.
Among the 306 companies surveyed across various industries, 13 percent identified China as their top investment destination, representing a record low for that metric.
The survey, published on Sept. 12, also found that the percentage of U.S. companies that were profitable last year dropped to a record low of 66 percent.
China’s economic growth
slowed in the second quarter of this year. Official data show that gross domestic product growth slowed to 4.7 percent year on year, below
economists’ expectations and weaker than the 5.3 percent growth recorded in the previous three months.
Meanwhile, tension has been running high between communist China and the United States over issues from global and regional security—such as the Chinese regime’s aggression in its
sovereign claims in the South China Sea—to trade policies and practices, such as Beijing’s yearslong state subsidies to its
electric vehicle industry.
“Increasing geopolitical pressures, particularly in the run-up to the US election amid escalating trade tensions, and China’s economic slowdown are leading firms to ramp up risk management and adjust their investment strategies,” the chamber said in a statement accompanying the report.
In 2023, a record 25 percent of U.S. companies reduced their investment in China, and 20 percent are expected to follow suit this year, the chamber’s report found. The primary reason cited for this trend was concern over China’s slowing growth.
According to the
State Department, U.S. foreign direct investment in China declined by 13.7 percent to $163 billion in 2023.
The chamber’s Shanghai branch chairman, Allan Gabor, said in a statement that many businesses are now redirecting investments to other regions, such as Vietnam, Malaysia, and South Asia.
The report was published a day after the European Union Chamber of Commerce in China released its annual report, which echoed similar concerns about the challenges of doing business in China.
“For a growing number of companies, a tipping point has been reached, with investors now scrutinizing their China operations more closely as the challenges of doing business are beginning to outweigh the returns,”
said Jens Eskelund, the chamber’s president.
Aside from China’s underperforming economy, issues that prompted European companies to look for markets elsewhere include “perennial market access and regulatory barriers,” “a highly politicized business environment,” industrial overcapacity, and “the persistence of ambiguous rules and regulations,” the chamber said in the
report.
While Chinese authorities repeatedly pledged to reform and open up China’s market, the chamber said doubts over Beijing’s commitment are increasing after “more than a decade of largely unfulfilled pledges.”
“With
national-security considerations increasingly being balanced against—and sometimes taking precedence over—economic growth, it raises the question of whether Chinese officials have sufficient space to introduce pragmatic, pro-business policies,” the report states.
The Associated Press contributed to this report.
