The View | Decoupling? Cooling Western attitudes towards China leave MNCs treading water

Foreign investment continues to grow and decoupling is not yet an inevitability but for most Western multinationals, the big decisions on China are on ice

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Pedestrians pass an Apple store in the Wangfujing shopping area in Beijing, on February 10. MNCs in China’s big market are having to cope with the souring of Western attitudes towards China, a relatively new and unexpected phenomenon. Photo: Bloomberg

Published: 9:30pm, 28 Feb 2023

Western multinationals have poured capital and technology into China over the last few decades. Many have achieved billions of dollars in sales, and surveys of the European and US chambers of commerce in China suggest that profits at their members’ China operations have, in many cases, exceeded results at home or in other markets.

The seeds for such performances were planted in the 1980s and in the initial years of the market opening after China entered the World Trade Organization in 2001. Foreign companies had first-mover advantage in bringing products and services into a country in which little demand had existed and where local competitors had limited technologies and management know-how.

There were plenty of operational problems to be solved, but older multinationals such as Unilever and Shell drew on their experiences in similar markets around the world. Over time, while Chinese companies gained market share or opened new businesses in the digital realm across many industries, growth across the board remained high for years.

But over the last three years, political winds changed, Covid-19 struck and China’s economic growth nosedived. Many in the global business community who had enthusiastically advocated engagement in and with China have lost their voice and are in retreat. In the West today, arguing in favour of China carries reputational risks.

According to recent surveys, expatriate and Chinese top executives working for multinationals in China remain surprisingly optimistic, but are faced with a deluge of negative, if not hostile, reporting on China in the West.

Their positive attitude may be a short-term reaction to the sudden opening of the country at the end of last year, or a continued belief in analysts’ forecasts of exceptional market growth.