According to the annual report released on Wednesday (July 16) by the US-China Business Council, American companies’ willingness to invest in China has hit a historic low. These companies are facing multiple challenges including US-China geopolitical competition, tariff pressures, and overcapacity, resulting in a rapid decline in overall business confidence.
The survey, conducted from March to May, involved 130 companies and published in the “2025 China Business Environment Survey” (PDF). While most of the US firms are not planning a complete withdrawal from China, they are becoming increasingly conservative in terms of investment. Around 88% of the surveyed enterprises expressed concerns about the Chinese economy.
Sean Stein, Chairman of the US-China Business Council, noted that profitability for businesses in China is not as robust as before, and risks are continuously rising, including reputation risks, regulatory risks, and political risks.
Established in 1973 and headquartered in Washington D.C., the US-China Business Council represents over 270 American companies operating in China, ranging from small enterprises to multinational corporations.
This year, only 48% of the companies stated intentions to increase investments in China, significantly lower than the 80% reported last year. Deputy Chairman Kyle Sullivan mentioned that over half of the surveyed businesses indicated no plans for new investments in China this year, marking an all-time high according to the council.
Simultaneously, over one-third (34%) of the surveyed companies reported pausing or reducing their planned investments in China over the past year, an increase compared to the previous year’s 26%.
Additionally, 27% of the companies stated either moving or planning to move some of their operations out of China, a rise from 19% last year. Concerning the future prospects of doing business in China over the next five years, 29% of the enterprises hold a pessimistic view, the highest recorded in the survey’s history.
The report highlighted ten major challenges American companies face in China this year, with three directly linked to geopolitics. “US-China relations” remained the top concern for the second consecutive year, with “tariffs” climbing from eighth place last year to second this year.
Since the continuous tariff rate escalation after April 2, combined with the uncertain progress of bilateral negotiations, businesses’ confidence has been shaken, disrupting their investment plans.
About 88% of companies stated that their business operations have been impacted by the tense US-China relations, a further increase from 79% reported last year. Moreover, 68% mentioned that tariffs directly affected their operations, notably affecting manufacturing and technology enterprises, with a percentage approaching 90%.
Approximately 40% of the surveyed businesses reported being affected by US export control policies, leading to sales losses, disrupted client relationships, and damaged reputations.
The impact of export control policies has extended from the semiconductor industry to broader sectors. In 2025, nearly half of the companies claimed to have lost orders due to export restrictions, with 56% of the lost orders being transferred to Chinese competitors.
Stein urged that Washington’s export controls must be “precise” because if American companies withdraw from the market, European, Japanese, or Chinese companies will rapidly fill the vacuum.
As the slowdown in the Chinese economy and overcapacity continue, it further squeezes the profit margins of American enterprises. China’s industrial policies, unequal access to public procurement markets, restrictions on cross-border data transfers, and slow progress in intellectual property protection exacerbate the pressure on American companies.
The report warned that overcapacity in China is rapidly spreading. Initially concentrated in upstream manufacturing sectors, overcapacity has now extended to multiple fields like consumer goods and healthcare, affecting businesses from 25% to 42%.
In the industrial and manufacturing sectors, the impact of overcapacity is particularly significant, with 92% of affected companies.
The overcapacity is deepening deflationary pressures in China. 81% of the affected companies noted that their industries have experienced price declines.
Although the Chinese authorities have promised to improve the business environment, many systemic challenges show no substantial progress. The report revealed that only 10% of the companies believed there was any improvement in market access to state-owned enterprises by the Chinese authorities, while 33% indicated a deterioration, exceeding last year’s 27%; the remaining 58% saw no significant improvement.
Intellectual property protection remains one of the top ten challenges. Three-quarters of the surveyed businesses expressed concerns about insufficient intellectual property protection in China. Most companies stated that the overall intellectual property environment this year showed no significant improvement compared to last year.
According to official data cited in the report, despite China’s GDP growth of 5% in 2024, the contribution of domestic consumption decreased significantly, accounting for only 45% compared to the previous year.