US-China trade tensions ease, lifting business confidence, but Chinese competition emerges as top concern
US companies operating in China have become more optimistic about their business prospects after confidence fell to historically low levels amid trade tensions, weak economic growth and intensifying competition, according to a new survey by the American Chamber of Commerce in Shanghai.
The share of companies that were optimistic about their five-year outlook in China rose to 58 per cent, up 17 percentage points from a year earlier, according to AmCham Shanghai’s annual China Business Report released on Thursday. The increase ended a four-year period of historically weak confidence among its members.
The improvement comes as the United States and China have sought to stabilise their trade relationship following an escalation in tariffs and other restrictions. US President Donald Trump visited China in May, while Chinese President Xi Jinping is expected to travel to the United States later this month.
“There has been a mood shift among our members,” said Jeffrey Lehman, chairman of AmCham Shanghai.
Lehman said last year’s survey was conducted during a period of renewed trade tensions, while this year’s survey followed the May meeting between Trump and Xi in Beijing.
The survey suggests that the improvement in US-China relations has reduced concerns among American companies operating in China. For the first time since 2022, US-China tensions were no longer identified as the biggest challenge facing businesses.
More from BusinessInstead, competition from Chinese companies emerged as the leading concern. About 68 per cent of respondents identified domestic competition among their top three business challenges, up five percentage points from a year earlier.
By comparison, 53 per cent cited US-China tensions among their top three concerns, down 13 percentage points from the previous year.
Chinese companies are increasingly competing with foreign businesses on areas including speed to market, product development and quality, the report said.
The improvement in confidence also coincided with stronger financial performance. About 78 per cent of companies surveyed said their China operations were profitable last year, the highest proportion recorded since 2019.
Investment sentiment also improved, although the survey pointed to continued caution among companies. About 28 per cent of respondents said they increased investment in China in 2025, the highest share in four years.
Looking ahead, 31 per cent said they planned to increase investment in China in 2026, while 14 per cent expected to reduce investment.
The survey also showed some improvement in how US companies viewed China’s regulatory environment. The share of respondents who considered the regulatory environment transparent rose seven percentage points to 55 per cent, the first time the measure has exceeded 50 per cent since 2020.
However, expectations for further regulatory opening remained subdued. Only 39 per cent expected the regulatory environment to become more open, down two percentage points from a year earlier.
US companies are also increasing their focus on research and development in China, while maintaining limits on sensitive technology and innovation.
Half of the companies with China-based R&D operations planned to increase spending this year, up from about one-third in 2025. At the same time, 46 per cent said their headquarters had imposed restrictions on R&D activities in China, up six percentage points from the previous year.
The survey was conducted in June and covered 262 companies. Nearly 90 per cent of respondents had operated in China for more than a decade, while 63 per cent had been present in the country for more than 20 years.
(With inputs from agencies.)
