U.S. firms continue to encounter a complex and evolving business environment in China, shaped by persistent regulatory uncertainty, intensified competition from domestic firms—both state-owned and private—and heightened geopolitical and economic risk.

Table: Top 5 Challenges Reported by U.S. Business in China in 2024-5

Source: AmCham China; U.S.-China Business Council (USCBC), AmCham Shanghai 

Rising tensions in U.S.-China relations remain the foremost concern for American companies. Firms report exclusion from tenders, delayed approvals, increased regulatory scrutiny, and reputational risks linked to their U.S. affiliation. Companies also expressed concern about the Chinese government’s increased use of tools such as the Anti-Foreign Sanctions Law; Unreliable Entities List; new dual-use items export Control List, which took effect on December 1, 2024; and export controls to target U.S. and other foreign companies for crossing Beijing’s political redlines and as a form of diplomatic leverage. (Note: Beijing developed these legal authorities in recent years as part of a broader “foreign-related rule of law” reform effort aimed at increasing China’s influence on foreign and international legal matters.) 

Security concerns are likewise a top concern. After amendments to China’s Counterespionage Law broadened the definition of espionage, Chinese security officials raided and detained staff at several multinational due diligence companies operating in China in 2023.  With no effective judicial recourse or other means for challenging these actions, foreign firms reported significantly reduced confidence in China as an investment market. U.S. and other foreign companies also reported heightened anxiety about doing business in China due to the Ministry of State Security’s (MSS) intensified campaign against foreign firms and public messaging warning that foreign spies are “everywhere” and calling for society-wide vigilance.

Chinese government efforts to streamline administrative processes and enhance transparency have focused largely on improving the business climate for domestic Chinese firms. U.S. companies continue to face challenges stemming from inconsistent regulatory interpretation and opaque enforcement. Regulatory compliance risk now ranks among the top three concerns for American firms, particularly in sectors facing evolving or newly imposed rules. Companies struggle with licensing delays, overlapping regulations, and abrupt policy shifts that complicate long-term planning.

Cybersecurity and data governance also remain top-tier challenges for U.S. companies. While China has taken steps to ease compliance—such as implementing the Network Data Security Management Regulations and piloting cross-border data transfer mechanisms—these efforts remain limited. The proposed “negative list” approach, which would exempt non-sensitive data from security reviews, has yet to be finalized, leaving firms uncertain about compliance expectations. Basic terms such as “important data” continue to lack definitions that apply consistently across industry sectors. High costs, inconsistent enforcement, and regulatory misalignment with U.S. and EU laws continue to complicate operations, prompting calls for greater clarity, national-level reform, and streamlined approval pathways.

Meanwhile, competition from Chinese firms—often bolstered by significant state support—continues to intensify. China’s industrial policy focus on “self-reliance” and indigenous innovation provides domestic firms with advantages such as preferential financing, regulatory flexibility, and favorable access to public procurement. These forms of regulatory and other discrimination pose ongoing challenges for foreign businesses, particularly in sectors targeted by Chinese industrial strategies.

Macroeconomic headwinds further complicate the landscape. Slowing growth, weak consumer and investor confidence, and hyper-competition fueled by overcapacity in both traditional and emerging industries have prompted many U.S. firms to revise their investment and expansion plans in China. These dynamics, combined with rising labor and operational costs, a deepening job-skill mismatch among China’s labor force, and a looming demographic shift towards an older workforce, are all reducing China’s attractiveness as a low-cost manufacturing base. As a result, many U.S. firms are shifting toward “in-China-for-China” strategies, realigning their China operations to focus more squarely on serving domestic demand while simultaneously diversifying production outside of China in a “China plus one” de-risking strategy.

Intellectual property (IP) protection remains a concern. While enforcement mechanisms have improved in some areas, IP infringement continues to pose risks, especially for innovative and technology-intensive firms. In addition, U.S. companies report ongoing pressures to transfer technology, localize R&D, develop IP and file patents in China, or meet content requirements as conditions for market access, and many companies report that Chinese government administrative and licensing procedures (e.g., for certain export licenses) often require foreign companies to divulge trade secrets and other sensitive information without adequate justification or safeguards. Companies must take proactive steps to safeguard their IP and make full use of available legal remedies in China’s evolving enforcement landscape.

Finally, China’s use of export controls to manipulate supply chains for economic and geopolitical purposes has emerged as a top concern and source of risk for U.S. and other foreign companies doing business in China. Beijing unified its dual-use export control regulations in December 2024 and subsequently used controls on the export of certain critical minerals as a diplomatic countermeasure on multiple occasions. Export controls on seven rare earth elements in April 2025 announced at the same time as a raft of other countermeasures to U.S. trade actions caused massive disruptions to global supply chains, particularly for advanced manufacturing sectors reliant on rare earth magnets such as automotive, medical device, and aerospace. The implementation of these export controls has resulted in a surge of export license applications, inconsistent enforcement nationwide, and a lack of transparency. U.S. companies should consider alternative sources to mitigate against similar future use of export controls against foreign industry for political purposes.