By Casey Hall
SHANGHAI (Reuters) -Political tensions, fierce domestic competition and China’s slowing economic growth are sapping the confidence of U.S. businesses in the country, with optimism about their five-year outlook falling to a record low, a survey showed.
Only 41% of U.S. 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 U.S. 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% of respondents saying U.S.-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% posting profits. Revenue performance also improved, with 57% of members, up from 50% the year before, achieving year-on-year growth.
This said, only 45% 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%, expect new U.S.-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% – 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% from 22% last year.
Only 12% of respondents ranked China as their firms’ top investment destination, another record low in the survey’s history.
In the past year, 47% 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.
(Reporting by Casey Hall; Editing by Sharon Singleton)
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