Washington — Some of the world's major companies are considering moving production to friendlier coastlines amid security limitations, protectionism, and sour relations between Beijing and Washington.
Adidas, Apple, and Samsung are looking elsewhere.The Chinese economy struggled in 2023, but American fast-food titans couldn't pass up a 1.4 billion-person market.
KFC China's parent company opened its 10,000th shop last month and aims to reach half the population by 2026. McDonald's to open 3,500 Chinese stores in 4 years. Starbucks' greatest international project was a $220 million manufacturing and distribution plant in eastern China.
Last month in San Francisco, Chinese President Xi Jinping appealed to American CEOs about China's "super-large market"'s merits. China's modernization plan excludes fast food and other consumer goods, unlike Washington's computer chip export ban.
“As you try to interpret the signals from McDonald's and Starbucks” and other chains, Flexport chief economist Phil Levy says, “note what the industries are: These are not high-tech burgers.”
Some U.S. companies are spending more in the world's second-largest economy, but foreign investment declined this year. July-September net foreign direct investment in China was $11.8 billion, the first quarterly shortfall since Beijing began reporting data in 1998.
Due to tensions between China and its Western trade partners, international firms are moving assets to Southeast Asia or India or repatriating income. When China's economy is recuperating from the epidemic and property sector issues, progress is slowed.
Commerce Ministry spokesperson Shu Jueting stated, “The U.S. side has repeatedly politicized economic, trade, and technology issues, overstretched security, abused export control measures, and restricted trade and investment in China by its own enterprises, forcing enterprises to give up opportunities in the Chinese market and win-win cooperation.
The U.S.-China Business Council, which represents American enterprises in China, found that uncertainty had taken a toll: 43% of its members believed China's business environment had worsened in the previous year, and 83% were less hopeful than three years ago. Only 10% invested more in China, while 21% invested less.
Similar results were found in European and Japanese corporate questionnaires.China is a big but failing market. Young Chinese unemployment exceeded 20% in June, the previous government figure. The property and equity markets have down 15% since July. Spending worries many Chinese. Bullishness for China as other corporations de-risk and separate from Beijing may improve fast-food profitability.
McDonald's CEO Chris Kempczinski said in November that there is no better time to simplify our structure, given the tremendous opportunity to capture increased demand and further benefit from our fastest-growing market's long-term potential. The Chicago-based company increased its minority 20% ownership of McDonald's licensed stores in China, Macau, and Hong Kong to 48%.