Survey: US Firms' Profits in China Improve, but Half Reluctant to Expand Investment

(Central News Agency, Shanghai, 11th, reporter Liao Wenqi) A survey report by the US-China Business Council shows that although US companies' profitability in China has improved to a multi-year high, half of US companies are reluctant to expand investment in China and are continuing to adjust their supply chain layouts due to factors such as US-China tensions, tariffs, and export controls.

The US-China Business Council released its 2026 "China Business Environment Survey" on the 10th. The survey was conducted from February to March this year and collected 175 questionnaires.

The report shows that "US-China relations" remain the biggest challenge for US companies operating in China. Although the US and China have reached a trade truce agreement, 72% of surveyed US companies are affected by tariffs, a figure that continues to rise.

At the same time, more than one-third of surveyed US companies are affected by China's export controls and sanctions. The automotive, logistics, industrial, and manufacturing sectors are the most impacted. With some rare earth resources still difficult to obtain from China, about three-quarters of surveyed US companies are seeking to procure rare earth resources and critical minerals from suppliers outside of China.

Additionally, US export controls affect nearly half of the surveyed US companies. 61% of the affected companies reported that their sales share has shifted to Chinese competitors, with order losses increasing by 5 percentage points year-on-year.

Driven by the need to enhance supply chain resilience, 59% of surveyed US companies are reassessing their supply chains, an increase from last year. About one-third of these companies are investing in production outside of China.

"China's macroeconomy" is the second biggest challenge companies face this year. 58% of surveyed US companies cited insufficient domestic demand as their primary concern. US companies' confidence in China's economic recovery remains weak, with 49% expressing concern about China's medium-to-long-term growth prospects. Fewer US companies cited "insufficient stimulus policies" as a primary concern, suggesting they view China's economic challenges as more structural than cyclical.

Despite concerns about China's economy, 92% of surveyed companies reported being profitable in 2025, up 10 percentage points from the same period in 2024, reaching the highest level since 2021. Over half of the surveyed companies are optimistic or relatively optimistic about the next five years, the highest level since 2021.

However, US companies' willingness to invest in China this year remains low. Only 49% plan to invest in China this year, an increase of just 1 percentage point from last year, but a significant drop from 80% in 2024.

The report concludes that the Chinese market cannot be ignored for US companies, with 95% of respondents stating that their China business is crucial for maintaining global competitiveness. However, US companies need to see signals that they are "welcome" in the Chinese market. The business environment for foreign companies in China has not improved, and the Chinese government continues to provide preferential treatment to local companies through industrial policies. (Editor: Qiu Guoqiang) 1150611