Record Low US Investment Plans in China \ Newslooks \ Washington DC \ Mary Sidiqi \ Evening Edition \ American companies in China report record-low investment plans and weakening profit expectations due to economic slowdown and rising geopolitical tensions. The top concerns now stem from U.S. export controls and tariffs, not China’s regulatory environment. A growing number of businesses are looking to relocate operations outside China in 2024.
Quick Looks
- Record number of US companies plan no new China investment
- Profitability declining amid weak Chinese demand, overcapacity
- Top concerns include Trump-era tariffs and US export bans
- Over 40% of firms report harm from export controls
- Nvidia allowed to resume some chip sales to China
- 27% of US firms plan relocation outside China
- Fewer than 50% optimistic about long-term outlook in China
- China’s regulatory risks fall from top five concerns
- Firms warn restrictions could cost competitiveness globally
- European companies also scaling back China operations
Deep Look
Under the renewed leadership of President Donald Trump, American businesses operating in China are facing unprecedented levels of uncertainty and are scaling back investment in record numbers. According to a new survey released by the U.S.-China Business Council (USCBC), over half of U.S. companies with a presence in China report having no plans for new investments this year — the highest level ever recorded.
The sharp decline comes as the Trump administration has revived and expanded trade measures first introduced during his previous term, including heightened tariffs and a fresh wave of export controls aimed at curbing China’s access to advanced technologies. The result is a significant shift in business sentiment, with American firms citing U.S.-led trade restrictions and growing geopolitical risks as the primary challenges to operating in China — even more so than China’s longstanding regulatory and market access hurdles.
“Businesses in China are less profitable now than they were years ago,” said Sean Stein, president of the USCBC. “But it’s the **surge in risk—political, reputational, and regulatory—that is causing this drop in confidence.” He noted that while many issues remain unresolved in China, the current top concerns originate increasingly from Washington.
The business climate has worsened against the backdrop of China’s slowing economy. Weakened domestic demand and industrial overcapacity are squeezing margins, and price wars are making it difficult for foreign firms to compete. Meanwhile, new U.S. export controls—justified under national security grounds—have placed tight limits on shipments of high-tech components like semiconductors and AI chips.
About 40% of the 130 companies surveyed said they’ve suffered direct harm from the Biden-era export policies that Trump has now strengthened. These include lost contracts, fractured client relationships, and reputational damage, particularly for suppliers labeled as unreliable due to the shifting policy landscape.
One such company affected is Silicon Valley chipmaker Nvidia, which received conditional approval from the Trump administration to resume sales of its AI-focused H20 chips to Chinese firms. However, its most powerful semiconductors remain banned, part of a broader effort by President Trump to prevent sensitive technologies from aiding China’s military development.
The Trump White House has doubled down on strategic decoupling, with export restrictions now viewed as a centerpiece of national security. While the administration insists the measures are narrowly targeted, business leaders warn they could backfire. “If American companies pull out, the vacuum will be filled by European, Japanese, or Chinese firms,” Stein warned.
Despite 82% of U.S. companies in China reporting profits in 2024, less than half remain optimistic about their future in the country. Concerns over deflation, shifting policy, and instability in U.S.-China relations are clouding the long-term outlook. What’s more, a record 27% of U.S. companies now plan to relocate operations outside of China, up from 19% last year.
This trend is significant — not only because of what it signals about confidence in China, but also because of what it reveals about shifting corporate strategy under Trump’s second term. With tariffs and export controls back in full force, U.S. multinationals are hedging against geopolitical fallout and exploring alternative markets in Southeast Asia, India, and Latin America.
Interestingly, longstanding concerns like intellectual property theft and unfair regulations have fallen out of the top five business risks in China for the first time. But USCBC officials caution that this does not reflect any real improvement on China’s part. “It’s not that China fixed the system,” said Stein. “It’s that the new risks coming from the U.S. are now just as severe—or worse.”
A separate European Chamber of Commerce survey released in May reflected similar sentiments. European companies in China are also cutting costs, downsizing operations, and reducing investment due to economic slowdown and shrinking profit margins in a hyper-competitive Chinese market.
Although recent diplomatic talks in Geneva and London helped temporarily ease some of the harshest tariffs and controls, no permanent trade deal has been reached between Washington and Beijing. With President Trump again at the helm and intensifying his “America First” economic agenda, businesses expect tensions to continue into 2025 and beyond.
Most critically, American firms emphasized that they cannot remain globally competitive without access to the Chinese market. Despite the growing challenges, China remains a vital hub for global supply chains and a key consumer market. However, the risks are growing—and in Trump’s America, so is the pressure to realign.
As Stein summarized, “The relationship between the U.S. and China may be defined by competition, but businesses are now feeling the cost of that contest more directly than ever before.”
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