Western companies are withdrawing or downsizing their operations in the Chinese market, which is facing a slowdown in growth.
On the 12th, the American daily The Wall Street Journal (WSJ) reported, "As China's economic growth slows and difficulties in doing business within China increase, Western companies are halting their investments in China."
Western companies are withdrawing or scaling down their operations in the Chinese market, where growth is slowing. [Image source=Getty Images]
According to the report, many global companies are lowering China’s priority as an investment destination, while shrinking or consolidating their businesses in China due to the economic slowdown and declining profits.
This trend is also reflected in reports released by the American Chamber of Commerce in China and the European Union (EU) Chamber of Commerce.
The Shanghai-based American Chamber of Commerce announced the results of its annual survey of 306 member companies on the same day, revealing that the proportion of respondents who viewed their China business optimistically over the next five years dropped 5 percentage points from the previous year to 47%. This is the lowest figure since the survey began in 1999.
The percentage of American companies reporting operating profits in 2023 was only 66%, marking a record low. Meanwhile, 25% of companies reduced their investments in China last year, the highest proportion recorded.
The American Chamber of Commerce pointed out that U.S. companies are facing significant management difficulties in the Chinese market due to geopolitical tensions between the U.S. and China and the slowdown in China’s economic growth.
The EU Chamber of Commerce also noted in a report released the previous day that "European companies are reconsidering whether to continue investing due to high market entry barriers and the economic slowdown," and some companies have reached a turning point.
As a result, major global companies are pulling out of China.
Walmart, the largest U.S. retail distributor, sold its stake in JD.com, its long-time Chinese joint venture partner held for eight years, for $3.6 billion (approximately 4.8 trillion KRW) last month. U.S. IT company IBM also closed its research and development (R&D) center in China and laid off more than 1,000 employees.
Automakers are also struggling in the Chinese domestic market, where Chinese companies hold three-fifths of the market share, and are downsizing their operations.
Japanese automaker Honda recently halted production at three factories in China and reduced its workforce through voluntary retirement. Honda’s sales in China in the second quarter of this year fell 32% year-on-year to just over 209,000 units.
Korean automaker Hyundai Motor has also been readjusting its China operations. After selling its Beijing Plant 1 in 2021 among Beijing Plants 1 to 3, Changzhou Plant, and Chongqing Plant, it was confirmed that Hyundai sold its Chongqing Plant earlier this year. Instead of expanding in China, Hyundai is reportedly expanding its business in India, according to WSJ.
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