Record Percentage of U.S. Companies Redirect China Investments to Southeast Asia

Beijing — Nearly half of U.S. businesses have shifted planned investments away from China over the past year, the highest on record, according to a survey released Wednesday by the American Chamber of Commerce in Shanghai. The shift has primarily benefited Southeast Asia, followed by the Indian subcontinent, while the U.S. and Mexico tied as the third-most popular destinations.

The poll, carried out between May 19 and June 20, discovered that 47% of the participants had reallocated investments initially intended for China. The trend follows increased U.S.-China tensions and tariff disagreements. Last month, Washington and Beijing had agreed to a 90-day extension of their trade truce, but executives say the respite is too brief to impact long-term supply planning.

For a business, 90 days is far too short," AmCham Shanghai President Eric Zheng said. "At least we don't have to worry about even more tariffs for the moment, but the problem is still there.

The results underscore the increasing challenges facing U.S. companies in China. Almost two-thirds of respondents reported that existing tariffs, 58% on goods from China coming into the U.S. and 33% on goods from the U.S. coming into China, based on the Peterson Institute for International Economics, were impacting their businesses heavily, especially in manufacturing.

Confidence in China's five-year business prospects has now plummeted to an all-time low for the fourth year running. Just 28% of businesses said their Chinese operating margins were above global averages in 2024, while 33% reported their performance in China was poorer.

Competition is also growing, with U.S. companies reporting that the Chinese are ahead in six out of eight areas, led by artificial intelligence. Nearly 41% of respondents indicated their Chinese peers led on AI adoption, increasing to 62% in the consumer and retail segment. American businesses, on the other hand, positioned themselves as ahead only in product quality and innovation.

Nevertheless, the Chinese regulatory environment has improved. Almost 48% of firms interviewed indicated that the local environment in their industries was transparent, from 35% in 2024. The percentage of businesses with transparency issues declined to 16%, as 37% of respondents indicated foreign and domestic firms were treated equally, from a minimal increase compared to last year.

China has taken various steps to encourage foreign investment, such as an "action plan" to facilitate entry into biotechnology and simplify procurement standards. Still, there are difficulties. Fourteen percent of the companies reported worsening conditions for foreign firms, with technology companies reporting the largest rate of difficulty at 31%.

AmCham Shanghai, which counts Apple, Ford, Honeywell, Meta, and Tesla among its members, said its members continue to be stuck between U.S. tariffs and Beijing's retaliatory tariffs. "We need to be compliant with export control regulations, but we also need to seek out opportunities to collaborate with Chinese partners," Zheng added.