American companies in China are increasingly pessimistic about the relationship between Washington and Beijing as geopolitical tensions escalate, even as they have a more favorable view of the nation’s economic recovery, according to a new survey.

Some 87% of respondents to a flash survey taken last week said they were at least slightly pessimistic about US-China ties, according to the survey published Wednesday by the American Chamber of Commerce in China. That was 14 percentage points higher than the chamber’s previous poll. 

“Bilateral relations between the United States and China have substantially deteriorated,” said Lester Ross, chair of AmCham China’s Policy Committee. “It’s hard to see at this point when they will begin to improve — and this, of course, affects the ability of business to operate across borders.”

The April flash poll included 109 respondents. The chamber’s earlier survey featured 319 responses, which were collected in October and November 2022, as well as February of this year.

The data underscores the headwinds facing American firms operating in the world’s second-largest economy. Alongside the April survey, AmCham on Wednesday released its 2023 white paper report, which labeled worsening bilateral relations as a “key challenge” this year.

“The deteriorating relationship has placed the American business community in the crosshairs as economic and trade issues have become deeply intertwined with national security and other law enforcement issues,” the report said.

The chamber called on the US and China to prioritize “high-level engagement” to address such concerns. “Working-level officials” should be empowered to engage with counterparts on “less sensitive issues” so as “to widen the lines of communication available for cooperative discussions,” the report added.

Ties between the two countries have worsened in recent months, with Chinese President Xi Jinping in March criticizing the US for what he called a strategy of “containment and suppression” — led by trade restrictions, blacklists and investment curbs — that has challenged China’s technological development. 

US Treasury Secretary Janet Yellen last week said the Biden administration was prepared to accept economic costs as it sought to protect US national security interests from threats posed by China, saying “we will not compromise on these concerns.”

The latest AmCham report echoes concerns held by others in China’s foreign business community about geopolitical tensions. A survey published last week by the European Union Chamber of Commerce in China found that Beijing’s push to become self-reliant in the technology sphere is driving more European companies operating there to rethink their research and development plans. 

While geopolitical tensions have dominated concerns among American firms in China, the US chamber’s flash poll indicated that members were becoming more optimistic about other aspects of the business outlook, including China’s recovery.

Supply Chains

Some 59% of respondents to the April survey reported a positive outlook about the economic rebound, up 22 percentage points from the earlier poll. The new survey was taken just after official data showed growth picked up in the first quarter, fueled by strong consumer spending.

In addition, despite recent attention on companies such as Apple Inc. moving more production of key products to other nations, the survey found that 73% of the companies polled are not moving their supply chains outside of China. At the same time 27% said their companies are reprioritizing other countries, up 21 percentage points from the previous survey.