Multinational firms are finding it hard to let go of China

Marv Gandall

Despite the trade war initiated by the US and its allies under the Trump and Biden administrations, the latest Economist reports that the world’s largest 200 companies now rely on China for 13% of sales, up from 9% of sales five years ago, with 144 continuing to expand their operations in the country.

Foreign producers are generally under pressure from Chinese rivals which the publication attributes to the fading status appeal of foreign brands for retail consumers and the diminished technological advantage of foreign manufacturers as Chinese heavy industry has modernized.

Foreign firms which can’t compete with their Chinese rivals have either fully divested or left subsidiaries behind to operate as self-contained units. But this is not an option for big manufacturers like Boeing or foreign luxury brand exporters like Louis Vuitton Moët Hennessy(LVMH) which rely on production abroad, and most are instead ramping up their investments in China to compete more effectively.

According to the Economist, the leading American, Japanese, and European firms not only fear losing Chinese market share in China to the country’s rising car, aircraft, software, and other industries, but that the latter will use their domination at home “as a launch pad to enter other big markets”.

'If relations between China and the West remain cordial, doubling-down may pay-off’, it concludes."If they worsen, things may quickly unravel for the geopolitical gamblers of global business”.


Trump's tariffs marked a change from unfettered globalism to regulated imperialism within a large section of the capitalist state. However, the economic effect was piddling, making a comparison of a sales statistic from 2017 to now nearly useless.

More important than simple trade, the investment mix of U.S. and other western capital is changing. Supply deals that would have gone to Chinese contractors and partners now often go to India, Vietnam, and other places for low-tech, and back "home" for high tech. The U.S. state is committed to this shift, as shown by Biden's recent policy and legislation.

"If relations between China and the West remain cordial," ...! That ended several years ago. Whether a particular deal is reached or not, what was cordial has become wary, and what was wary has become negotiation between two mobs.

Even Marv's favorite Western capitalist ally in capitulation to Beijing, Olaf Scholz, sees how difficult it can be:

German Chancellor Olaf Scholz said the number of German companies that have ignored the risks of depending too heavily on the Chinese market was remarkable and stressed the need for diversification, in an interview with Focus magazine on Friday. "The importance of the Chinese market needs no explanation," he said, but the goal is not to be dependent on any one market. I am therefore surprised at how dependent some companies have made themselves on individual markets and have completely ignored the risks," Scholz told the magazine.