In the ever-shifting landscape of global business, an increasing number of American companies in China are fast-tracking their efforts to relocate manufacturing and sourcing operations. A survey released on Thursday by the American Chamber of Commerce in China sheds light on this trend, revealing that almost 30% of companies have either considered or initiated efforts to diversify in 2024. This figure surpasses the previous peak of 24% recorded in 2022 and even exceeds the 23% from 2017, a year marked by President Donald Trump’s introduction of tariffs on Chinese imports.
Several factors are fueling this shift, including heightened U.S.-China tensions. Michael Hart, the president of AmCham China based in Beijing, highlighted another significant influence: the repercussions of the Covid-19 pandemic. “Over the last five years, the pandemic has significantly impacted operations as China isolated itself from the global scene,” Hart explained during a briefing. “This reality has prompted businesses to reevaluate their supply chains, and I don’t foresee this trend slowing down anytime soon.”
During the pandemic, China imposed strict international travel restrictions and lockdowns in an effort to control the virus’s spread. While global supply chains felt the strain, companies began eyeing new regions for their operations. India and Southeast Asia emerged as favored destinations, but the survey noted an uptick—from 16% to 18%—in firms considering relocating back to the U.S. in 2024. Despite these shifts, over two-thirds, or 67%, of U.S. companies expressed no intention to move their manufacturing bases, though this number marks a decrease from the previous year.
The AmCham China survey, conducted between October 21 and November 15, included insights from 368 members. Notably, this survey period coincided with President Trump’s re-election on November 5. Recently, he announced plans to escalate tariffs on Chinese goods by 10% by February 1. This move is part of a broader intensification of the U.S.’s hard line against China, a stance that has continued under the Biden administration, emphasizing competitive dynamics and restricting Chinese access to high-tech U.S. products.
For 60% of survey participants, U.S.-China relations are expected to be the principal challenge for conducting business in China next year. Competition from local Chinese enterprises, whether state-owned or private, was cited as the second major hurdle for American businesses.
In addition to geopolitical challenges, China’s economic growth has experienced a slowdown, compounded by restrained consumer expenditure post-pandemic. In response, Chinese authorities have been ramping up initiatives to spur economic growth and remedy the real estate downturn. For a third consecutive year, over half of the respondents from AmCham China reported a lack of profitability in China, observing that the region’s competitiveness, in terms of profit margins, is diminishing relative to other global markets.
Moreover, the number of companies no longer viewing China as a prime investment location has risen to 21%, doubling since the pre-pandemic period. Yet, despite these trends, companies in the tech, industrial, and consumer sectors identify domestic consumption growth as their primary business opportunity for 2025, while services firms see potential in supporting Chinese companies’ international expansion efforts.
Michael Hart remains hopeful, acknowledging the continued appeal of the vast Chinese consumer base, which remains a “sizeable, important market” for many businesses.
