US companies are “more negative than they’ve been in a long time” about doing business in China, according to a recent statement from Michael Hart, the president of the American Chamber of Commerce in China (AmCham China). AmCham, the largest network of US businesses operating in foreign countries, actively promotes trade and commerce outside the US. 

Tensions between the world’s two biggest economies have been growing for some six years, a rivalry that has “made business very challenging”, according to Hart. 

That business sentiment has taken a turn for the worse was reflected, in early March, by AmCham China’s latest annual survey of its 900 members. 

It found that, for the first time in about 25 years, China was not a top three investment priority for a majority of US companies, with geopolitical tensions and domestic economic issues driving businesses to increasingly focus elsewhere, according to the report.

“A year ago, 60% of companies said China was the top or a top three investment priority and this year that’s fallen to 45%,” said Hart. “China is falling in the rankings as a place for people to invest globally. It’s still important but not one of the top destinations for the majority of companies.”

The number who see the “uncertainty of bilateral relations” as their leading challenge in China rose by 10% in the past year to 66%. Meanwhile, the proportion of those who perceive China as less welcoming to foreign companies grew to 49%.

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“Companies are [also] really tired after three years of Covid,” said Hart, referencing Beijing’s zero-Covid policy. 

Recent data and analysis from Investment Monitor corroborates this sombre picture, with chief economist Glenn Barklie explaining how greenfield foreign direct investment levels have halved since 2019, while mergers and acquisitions deals are down too. Companies are looking to diversify away from China due to increased costs, supply chain disruption and geopolitics, said Barklie. Other Asian countries such as India, Malaysia and Vietnam stand to prosper.

It is now five years since former US President Donald Trump imposed tariffs on China, which retaliated with its own. Today, 66.4% of US imports from China and 58.3% of Chinese imports from the US remain subject to tariffs, according to the Peterson Institute for International Economics

Alongside this economic tug and pull, geopolitical flares have risen over Ukraine, Covid-19 and Taiwan. Yet, despite all these difficulties, trade between the two countries hit a record high of $690.6bn (4.76trn yuan) in 2022. Interest in China is still huge, but it is not what it was.