American Companies Reluctant to Do Business in China

American Companies Reluctant to Do Business in China

A slow seepage of an increasing number of businesses being established in China has been observed over the past few years. And why not? Because China has always proven itself to be the source of limitless opportunities for productive success of all kinds of occupations. Benefitting both the sides of the party, i.e. international ventures as well as the local authorities through the strategic joint venture – planning has always been aimed for since Deng Xiaoping’s leadership and reforms in the early 1990s. However, all appears to have been unhurriedly changing.

The Chinese market is now slowing down as the competition is increasing. Funny, how only earlier this year, Wal Mart’s boss, Mr. Douglas McMillon, had declared China a potential country for America’s future growth. They may have fallen flat on their faces by facing a fall of 6% in their sales as compared to the previous few years.

Even Yum Brands – China’s first big foreign fast food firm –  is facing problems these days. It was just in 2011 when the China’s division of Yum Brands was known to be providing more than half of its global operating profits, but after facing fierce competition from fast – food outlets like KFC, they too have fallen prey of the rapid growing opposition.

Media houses such as the China Central Television have resorted to the medium at hand to criticize the multinationals severely; especially the “absurd” pricing that is imposed over the citizens.

Even in the automobile sector, China’s antitrust laws have made it very difficult for foreign car –manufacturing companies to function smoothly leading to their ultimate loss. Every segment of the market, right from telecoms to tobacco is slowly being taken over by monopolies.

These sudden, but consistent changes are impacting quite a few factors in an unanticipated manner:-

  1. China’s market growth rate is slowing down, especially given the fact that the chances of broadening their horizon of development beyond what has already existed within the barriers of China, itself are being increasingly nullified.
  2. The labor market is being heavily affected by the wage costs rising and the employees being scarcer.
  3. Multinationals are facing challenges, especially given the fact that even local firms are now making use of superior technology to deliver to the needs of the public.

While, these factors may appear to benefit China in some or other way, it definitely is a bad news for the internationals, leading some of the foreign firms to even quit the Chinese market as a whole. A prominent example would that be of Revlon.

However, there are companies like Apple, Samsonite and Adidas among others who are still doing well as compared to others. Apple received a boosted sale of 87%, while, Samsonite, an American maker of luggage, enjoyed a 30% rise.

China has the largest population in the world – holding the greatest potential for investments, but, now the days are passe when multinationals ruled over the locals. Implications still prevail and it is the only time that will tell whether or not the struggling internationals will be able to adapt to the changing markets of China.