US companies eye China expansion for growth

As China reopens and its consumer activity appears to improve, major US companies are once again looking to the country as a key source of growth.

Why it matters

Following the end of the zero Covid policy that had seen China become a patchwork of different statuses – some cities open, others closed, often at extremely short notice – China and the United States are evaluating what they could do for each other, from a business and economic point of view. 

In context

For multinationals, China has been a vital source of growth at a time of slowing growth across the West. Pre-pandemic US GDP had hovered around the 2-3% annual growth mark, while China’s GDP had hovered around 7-8%.

While this growth slowed to just 3% in 2022, a return is expected, even if there are numerous policy challenges that the country must address, ranging from a property slump to a slowing export market around the world. Other observers anticipate a wave of “revenge spending”.

But concerns are growing both over the geopolitical situation between the US and China as well as the post-pandemic economic uncertainty that has affected the country. Tensions are not to be sniffed at as merely political problems. Marketers will have to contend with local brand preferences and a need for a deep sensitivity in communications from foreign brands.

What’s going on

The Wall Street Journal has a roundup of the signals coming from American executives about the promise of China’s return to growth:

• QSR and coffee expansion: McDonald’s plans to open 900 new stores in China this year, while Starbucks plans to open 3000 new stores by the middle of this decade.
• Luxury and fashion looks to the recovery of the sector’s largest market: Ralph Lauren has been gearing up for the reopening by focusing its new store openings in China, according to its most recent quarter. Burberry and Cartier have also noted growing sales in the country.
• Packaged food: Tyson Foods and Hormel Foods are expanding their facilities, with the latter reported in the Chinese press to be building a new factory outside Shanghai.
• Travel: the return of Chinese travelers is also expected to be globally significant for travel, as recent noises from Airbnb have suggested.

Sourced from the Wall Street Journal, World Bank, FT, WARC