The share of US companies in China looking to relocate has hit a record high, a study shows

BEIJING — A record share of U.S. companies in China are accelerating their plans to relocate production or procurement, according to a business survey released Thursday.

According to the American Chamber of Commerce in China’s annual surveys, about 30% of respondents are considering or have started such diversification in 2024, surpassing the previous high of 24% in 2022.

It also surpassed the 23% share recorded in 2017 when he was US president Donald Trump began his first term and began raising tariffs on Chinese goods.

In addition to the tension between the US and China, “one of the main effects we’ve seen in the last five years has been Covid and how China has closed itself off from the world because of Covid,” Michael Hart, president of Beijing-based AmCham China . , told reporters on Thursday.

“It’s been one of the biggest drivers of people realizing they need to diversify their supply chains,” he said. “I don’t see that trend slowing down.”

China has restricted international travel and closed parts of the country during the Covid-19 pandemic in an attempt to limit the spread of the disease.

While India and Southeast Asian countries remained the most popular location to relocate manufacturing, the survey found that 18% of respondents were considering moving to the US in 2024, up from 16% last year.

Most American companies had no plans to diversify. The survey found that just over two-thirds, or 67%, of respondents said they would not consider moving production, down 10 percentage points from 2023.

AmCham China’s latest survey covered 368 members from October 21 to November 15. Trump was re-elected president of the United States on November 5.

Trump confirmed this week plans to raise tariffs on Chinese goods by 10%and said that duties can enter as soon as February 1. This follows the increasingly tough US stance on China. The Biden administration has emphasized that the United States is competing with China and has imposed severe restrictions on the ability of Chinese companies to access high-end American technology.

More than 60% of respondents said that tensions between the US and China were the biggest challenge for doing business in China in the coming year. According to the survey, competition from local state-owned and private Chinese companies was the second most important problem for American companies operating in China.

In addition to geopolitical pressures, growth in the world’s second-largest economy has slowed as consumer spending has cooled since the pandemic. Chinese authorities at the end of September began to increase efforts to stimulate growth and stop the fall of real estate.

For the third consecutive year, more than half of AmCham China respondents said they were not making a profit in the country, adding that the region has become less competitive in terms of margins compared to other global markets.

The share of companies no longer listing China as a preferred destination for investment rose to 21%, doubling from pre-pandemic levels, the survey said.

Looking ahead, however, technology, industrial and consumer goods companies said they see domestic consumption growth as a top business opportunity in 2025, the survey found. The service companies said their best opportunity is Chinese companies looking to expand overseas.

Hart noted that many members remain optimistic about Chinese consumers as a “significant, important market.”