From Apple to Starbucks, Western firms' China dreams are dying

Economic growth is slowing, competition is stiffening and geopolitical tensions loom.

Things have never looked rosier for foreign firms in China - at least according to the country's Council for the Promotion of International Trade. The body, which is controlled by the Commerce Ministry, claims that 90 per cent of foreign companies rate their experience in China as satisfactory or better. According to a recent survey by the council, foreign firms say the economy is strong, local markets are attractive, and their outlook is bright. Following years of isolation during the Covid-19 pandemic, China's government insists that the country is open again for business, and that reforms have made life easier for foreign companies.

Executives of those companies scoff at all this. Many say they now struggle to justify investing in the country and talk instead of cutting staff. In a recent survey by the American Chamber of Commerce in Shanghai, less than half of respondents said they were optimistic about the prospects for their business in China over the next five years - a record low. On Dec 4, Ms Mary Barra, the boss of General Motors (GM), said the American carmaker would write down the value of its joint ventures in the country by more than US$5 billion (S$6.7 billion) and close factories there. Many American and European companies with once-thriving businesses in China are watching these unravel.

In recent decades, Western bosses looked to China not just as a place to make things cheaply, but also as a vast and growing market. According to our analysis, the sales in China of listed American and European companies that disclose them peaked at US$670 billion in 2021, accounting for 15 per cent of those firms' total revenue. Things have gone south since. In 2023, sales were down to US$650 billion; their share of total revenue slipped to 14 per cent. This year has shown no sign of improvement. Of those firms in our dataset that report quarterly sales in China, almost half saw these decline, year on year, in the most recent reporting period.