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China’s private sector
EconomyChina Economy

Why Chinese competition, not geopolitics, is the biggest challenge for foreign firms

Multinationals remain committed to the Chinese market despite pressures, analyst says, citing the actions of Apple and Nvidia as evidence

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People walk past a booth showcasing Apple’s suppliers during the China International Supply Chain Expo in Beijing on June 22. Photo: Reuters
Xinyi Wuin Dalian
The main risk for foreign businesses entering China is not geopolitics but fierce competition in the domestic market, an analyst said at the World Economic Forum’s Summer Davos.
Speaking on a panel in Dalian on Thursday, Joe Ngai, chairman of Greater China at McKinsey & Company, said securing access to the Chinese market was still a concern yet the real test lay in competing with local rivals.

“These guys are hungry ... they can beat everyone up, and you come in here, and the question is: what do you have to offer?” Ngai said.

“I’ve used this analogy of China’s business ecosystem being the world’s toughest gym,” he noted, comparing the aggressive local competition to a demanding environment that ultimately strengthened companies.

Tensions between China and other major economies such as the United States and the European Union have heightened scrutiny of cross-border trade and investment over the past year, making some companies increasingly cautious about their presence in the world’s second-largest economy.

But Ngai argued firms had come to realise that decoupling was “a far too simplistic way to think about the business world”, noting China’s industrial engine continued to underpin global supply chains.
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