Geopolitical and Economic Strains Drive U.S. Companies to Relocate Manufacturing from China

Record Number of U.S. Companies in China Accelerate Plans to Relocate Amid Rising Challenges

BEIJING — A growing number of U.S. companies operating in China are expediting plans to diversify manufacturing and sourcing outside the country, according to a survey by the American Chamber of Commerce in China (AmCham China) released Thursday.

Approximately 30% of surveyed businesses reported considering or initiating relocation efforts in 2024, surpassing the previous high of 24% in 2022 and significantly exceeding the 23% recorded in 2017. The trend highlights the mounting challenges of operating in China, including U.S.-China tensions and the aftermath of China’s stringent COVID-19 policies.

Key Drivers of Relocation

“COVID and China’s closure to the world during the pandemic have been some of the largest triggers for businesses to rethink their supply chains,” said Michael Hart, president of AmCham China. “I don’t see that trend slowing down.”

While Southeast Asia and India remain popular relocation destinations, the survey noted an increase in companies considering a return to the U.S., with 18% expressing interest in 2024, up from 16% in 2023.

Despite this, the majority of companies—67%—said they are not planning to relocate, though this reflects a 10-percentage-point drop from the prior year.

Rising Challenges

Over 60% of respondents identified U.S.-China tensions as their biggest challenge for doing business in China in 2024. Additionally, competition from local state-owned and private Chinese companies emerged as a significant concern.

Economic headwinds are compounding the challenges. Consumer spending remains subdued, and growth in China’s economy has slowed, further diminishing profit margins. For a third consecutive year, more than half of surveyed companies reported operating at a loss in China.

The survey also highlighted a doubling of companies no longer considering China a preferred investment destination, rising to 21% compared to pre-pandemic levels.

Optimism in Consumer Market

Despite these difficulties, optimism remains about China’s domestic consumption. Companies in the tech, industrial, and consumer sectors identified growth in Chinese consumer spending as the top business opportunity for 2025. Meanwhile, service firms see potential in helping Chinese companies expand overseas.

“China remains a sizable and important market for many of our members,” Hart noted, emphasizing the enduring significance of Chinese consumers.

Broader Implications

The survey underscores shifting dynamics in global trade and supply chains as geopolitical tensions, economic uncertainties, and market conditions push U.S. businesses to reassess their presence in China.

Conducted between October 21 and November 15, 2024, the survey polled 368 AmCham China members, providing insights into the evolving landscape for U.S. businesses in the world’s second-largest economy.

Reference News :- Share of U.S. companies in China looking to relocate hits a record high, survey finds

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