‘It will be a tough fight if money has to come from overseas. M&A is down. FDI is up but coming from a handful of German firms. If the BU or subsidiary has cash, they can finance development locally. Investment funds are also set up as separate entities for smaller investments. They function like private equity, which gives the China team more influence with local government.’
‘Semiconductor firms are restructuring themselves to contain the damage. They are creating a China-based R&D ecosystem with multiple BUs in diverse locations. Over time, they will start to have China IP. They will be smaller than they would have liked, but they are still moving forward. Other industries will follow suit as time goes on.’
‘After high-tech, life sciences got hit for reasons of cost containment, rather than geopolitics. After that, local firms in mobility, automotive, self-driving, and new energy were given preferential treatment . Next, it will be cutting-edge industrial machines, like laser cutters. Finally, agri-food is likely to become more sensitive. If you go through that list, it matches up neatly with the Made in China policy of 2015.’
‘Entity structures are often viewed as boxes to move around on a whiteboard. But rearranging structures have knock-on effects on R&D, corporate governance, and manufacturing.’
‘Chinese expats will teach the manufacturing team in the new locations how to create the product and set up the infrastructure. This means we will see more cultural, economic, and other exchanges between China and the rest of the world. A long-term process that could take decades will be good for the world.’
Amid heightened geopolitical tensions, the regulatory environment for foreign companies in China continues to evolve. Mitigating risks through strategic entity restructuring becomes both intricate and imperative for future-proofing the local business as companies balance risk with the pursuit of growth opportunities and prepare for all possible scenarios.
Dive deeper.
Log in for the full Forum Insight.
Join the peer-group discussion at upcoming Forum events.
Not yet a member?
Contact us to learn more.
