How US Companies Are Rethinking China: Key Findings from the 2025 Business Environment Survey

Key Challenges: Geopolitical and Policy Barriers

The survey of 130 member companies (43% with annual revenue over $1 billion) highlights three major contradictions: profit resilience (82% remained profitable in 2024), investment pullback (planned new‑investment projects fell to 48% from 80% in 2024), and market‑share erosion (32% reported pressure from local competitors).

Tariff Impact Intensifies

68% of firms feel a direct impact from US‑China tariffs, with 90% of manufacturing and technology firms affected. The top three cost pressures are rising manufacturing input costs (75%), labor costs (73%), and compliance costs (69%). Companies respond by shifting 49% of procurement to Southeast Asia, India, or Mexico, renegotiating 34% of supplier contracts, and passing 31% of costs onto consumers.

Trade Restrictions Reshape Corporate Strategy

Supply‑chain adjustments are accelerating: 39% of firms are relocating supply chains to Southeast Asia (71%), India (41%), or Mexico (41%). Meanwhile, 27% have already moved or plan to move parts of their business out of China (up from 7% in 2016). Investment contraction is stark, with 34% pausing or reducing China investment (2024 figure 25%) and the proportion of firms planning new investment dropping to 48% in 2025 (down from 80% in 2024). Export‑control impacts rose to 40% of firms, leading to a 59% market‑share decline and a 56% customer shift to Chinese rivals.

Domestic Policy Challenges

Overcapacity now affects 42% of firms, the first time it entered the top‑ten since 2016, with 92% of impacted firms in manufacturing, 44% in consumer goods, and 29% in healthcare. 81% report price declines in their sectors. Policy tilt favors local firms: 92% see unchanged or stronger policy support, while 53% benefit from government financing, 45% from tax incentives, and 42% from preferential procurement. However, 69% anticipate further market‑share loss in the next five years. Market‑access barriers remain, with 51% finding “domestic product” definitions ambiguous and 30% facing non‑public guidance exclusions, especially in medical and ICT fields. Data‑transfer restrictions concern 74% of firms, and IP enforcement is weak—43% cite inconsistent local enforcement and 42% note insufficient infringement penalties.

Corporate Performance and Strategic Adjustments

Profitability remains stable: 82% of firms were profitable in China in 2024, yet only 25% expect 2025 profit margins to exceed global averages. Investment logic shifts toward serving the local market (82%), enhancing global competitiveness (33%), and localizing supply chains for risk mitigation (29%). 66% view China as a core component of global business. Operational strategies become more conservative, with top priorities being core‑customer focus (80%), cost reduction and efficiency gains (52%), and expanding into lower‑tier markets (46%).

Policy Demands and Future Outlook

Enterprises call for reduced bilateral tariffs (75% support), eased market‑access restrictions (55%), and relaxed data‑compliance rules (43%). Structural risk warnings include overcapacity combined with weak domestic demand leading to deflationary pressure, and subsidy‑driven competition distortion—U.S. chip funds of $50 billion favoring local firms.

Key Conclusions

Short‑term pain: tariffs and supply‑chain migration cause 27% of firms to exit China, driving investment intent to a ten‑year low.

Long‑term commitment: 66% consider China essential to global competitiveness, with 58% deepening high‑end market presence and 31% advancing digital integration.

Policy inflection point: a 90‑day tariff‑negotiation window becomes critical, prompting firms to seek transparent exemption mechanisms.