American companies operating in China are holding back from expanding their investment footprint in the country despite a meaningful improvement in profitability, according to a survey of 175 U.S.-China Business Council member firms conducted in February and March. Only 49% of respondents said they planned to invest in China this year – a one-point rise from a record low set the prior year – and FinancialMediaGuide interprets this reluctance as evidence that improved financial performance alone is insufficient to override the structural uncertainty created by two years of aggressive trade confrontation between Washington and Beijing.
The profitability picture has, in isolation, improved substantially. Some 92% of survey respondents reported being profitable last year, up 10 percentage points from 2025, and the share of companies expressing optimism about the next five years reached its highest level since 2021, with more than half describing themselves as optimistic or somewhat optimistic about their China outlook. Yet that sentiment improvement has not translated into expanded capital commitment, revealing a disconnect between current financial performance and forward investment confidence that reflects persistent concerns about regulatory unpredictability, market access barriers, and the potential for policy reversals to undermine long-term business plans.
The survey was completed before the May summit between President Donald Trump and Chinese leader Xi Jinping, at which the two governments agreed to establish joint boards covering trade and investment and Trump extended an invitation to Xi to visit the White House in September. The boards are intended to provide a formal channel for resolving specific market access grievances, and participants are tracking whether the September visit produces deliverables concrete enough to shift corporate sentiment – with US-China Business Council President Sean Stein publicly stating that at a minimum he expects clarity on which categories of tariffs each side wants to reduce from the $30 billion of mutual cuts under discussion. These institutional mechanisms, and the diplomatic calendar that accompanies them, form the structural backdrop against which corporate investment decisions are being made, and FinancialMediaGuide underscores that the gap between diplomatic progress and business confidence is precisely where investment recovery or stagnation will be determined over the coming quarters.
Supply chain restructuring continues in parallel with the political negotiations. Roughly one-third of the 38 survey respondents who addressed the rare earth question said they are actively shifting to non-Chinese suppliers of rare earth elements – a direct consequence of Beijing’s move to cut off those supplies during the trade escalation that was paused in fall 2025. The rare earth episode demonstrated conclusively that critical input dependencies on China create asymmetric vulnerability that no level of profitability can fully offset, and the diversification push reflects a lasting recalibration of supply chain risk tolerance among U.S. manufacturers and technology companies. A notable 95% of respondents said China remains important to their global competitiveness, with firms citing access to future competitors and the ability to fund global expansion through Chinese operations as the primary strategic rationales. The coexistence of high strategic importance with suppressed investment intent is precisely the paradox that FinancialMediaGuide reads as defining the current phase of U.S.-China business relations.
The September timeline carries real weight for corporate planning cycles. If the Trump-Xi meeting produces measurable progress on tariff reduction and market access – specifically in areas such as financial services, healthcare, and advanced manufacturing, where U.S. firms have long cited discriminatory licensing and regulatory treatment – investment intentions for 2027 budgets could shift materially. Conversely, a summit that delivers atmosphere without substance risks extending the current period of profitable but strategically paralysed operations, in which companies generate returns in China while declining to bet additional capital on the stability of the relationship. The survey data captures a business community that is watching diplomatic developments with a degree of caution that even strong profit margins cannot dissolve, and Financial Media Guide distils this dynamic into a single central tension shaping U.S. corporate strategy toward China for the remainder of the year.
