Rising challenges for foreign firms in China

China remains critical for multinational firms. It is the world’s second-largest economy and its largest manufacturing location and trading nation. China is also among the world’s greatest beneficiaries of foreign direct investment (FDI). As of the mid-2010s, approximately a third of China’s GDP could be traced to foreign-invested enterprises (FIEs), their supply chains, and the consumer spending of related employees. However, the evolution of Chinese policies, slower economic growth, changing consumer behavior, and geopolitical tensions require a rethinking of China strategy for many foreign companies.
The policy environment

Foreign firms have always found China’s policy environment challenging.1China reserves a substantial portion of its economy for the state or state-owned enterprises (SOEs) through a Negative List for Market Access.2 China further restricts access to foreign companies through its Special Administrative Measures (Negative List) for Foreign Investment Access, while the financial sector has its own restrictions.3 While the number of sectors from which foreign firms are excluded has been substantially reduced over time, China is still among the most restrictive of the world’s large economies.

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Foreign Firms Confront Escalating Challenges in China Market