(Photo : Pixabay)
Representational Image

US firms operating in China have witnessed record-low profit in 2023, as economic headwinds continue affecting the growth of Asia's largest economy. 

According to a report by the American Chamber of Commerce in Shanghai, the rising tensions between the US and China are also playing a crucial role in the decline of business optimism in the country. 

Record-Low Profit Levels for US Firms

Out of 306 companies polled, a record low of 66 percent was profitable last year, while only 47 percent of the respondents expressed optimism about their businesses in China over the next five years. 

The report highlighted that business optimism among participants was the lowest in the survey's history of more than two decades. 

The future outlook for US firms operating in China has been reduced in recent years in terms of issues like trade and manufacturing between Beijing and Washington, as well as China's claims over the South China Sea.

The report from the American Chamber of Commerce comes at a time when China is grappling with a slowing domestic economy, driven by dampening consumer demand and deflationary pressures. 

Geopolitical Tensions Causing Issues

According to the report, the geopolitical tensions between both countries was one of the most crucial challenges to business operations in China. 

Eric Zheng, president of the American Chamber of Commerce in Shanghai, said during a press conference: "It is a balance between risk and reward." 

He added: "The perceived risks of doing business in China have gone up in the past few years, but at the same time the market is slowing down, with soft demand and overcapacity." 

Zheng also added that many businesses currently operating in China are redirecting their investments to other regions such as Vietnam, Malaysia, and South Asia.