U.S. Companies Are Souring on China. Some Are Capping Their Investments.

U.S. companies aren’t breaking up with China, but tensions between the two countries and China’s economic slump have contributed to a low point in confidence among American businesses operating there.

Companies are trying to recalibrate as China’s economy slows and concern grows about policy as Xi Jinping has tightened control over the economy. An increased focus on national security in the U.S.-China relationship presents new risks and backlash for global companies. “China is becoming more challenging for foreign investors. What businesses need above all else is clarity and predictability, yet across many sectors companies report that China’s legal and regulatory environment is becoming less transparent and more uncertain,” said Sean Stein, chairman of the American Chamber of Commerce in Shanghai in a statement.

“No one is doubling down anymore. Firms are very cautious and are repatriating profits, not reinvesting. That’s a marked change from when companies used to think China was a great place to invest,” Lardy adds. Despite the challenges, there’s no mass exodus. Just a fifth of respondents in the survey are considering a China exit over the next one to three years. But about a fifth of respondents were looking to formally cap investment in the country, with technology, education and banking companies among the most represented in this group.

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