How Chinese Companies Expand Globally Despite Headwinds

The phrase “chu hai” (“going overseas,” in Chinese) has become a rallying cry for many Chinese companies in the past few years. Faced with the sluggish rebound of China’s domestic consumer market following the COVID-19 pandemic, they have turned their sights to foreign markets in search of growth. Many Chinese business leaders are confident that their innovation capabilities can make them competitive in these markets, but unprecedented trade barriers and geopolitical tensions represent significant hurdles to their international ambitions.

To understand these difficulties and the strategies Chinese business leaders are using to overcome them, we interviewed 40 such leaders engaged in international business from early 2023 through early 2024. We learned that by reconceiving their approach to the notion of place, Chinese businesses are finding new ways to tackle the challenges of internationalization.

Chinese companies face a threefold challenge in expanding internationally. The first is rising trade tensions with the United States. The once globally dominant flow of trade between the U.S. and China has been curtailed by increased tariffs and export controls. This affects not just Chinese companies but any organization that relies on the U.S.-China trade route. Following the U.S. government’s announcement of export restrictions on AI chips to China in October 2022, leading Chinese semiconductor companies incurred losses, but chip manufacturers like Nvidia and Broadcom also took immediate hits to their stock prices. The second Trump administration is likely to exacerbate the trade tensions.

The second challenge is new investment regulations put in place by other countries and local jurisdictions. Governments in North America and Western Europe have increased their regulatory scrutiny of foreign businesses, especially Chinese ones. Deals that may have once proceeded smoothly are now being stymied by a range of legal challenges driven by geopolitical factors. Regulatory pressure can even undo completed deals: Chinese-owned seed producer Syngenta was ordered to sell 160 acres of land in Arkansas due to a 2023 law restricting foreign entities’ ownership of land in the state.

Third, while emerging markets hold the potential for growth, Chinese companies often face infrastructure deficits, bureaucratic inefficiency, and unfamiliar cultures in such markets. They are keen to expand into markets where there are fewer barriers in the form of trade tariffs (to date) targeting China and where more significant Chinese investments have already been made, such as in Southeast Asia.