China’s Business Landscape: A New Playbook
Key Takeaways:
Increasing investments in key industries like the metaverse and advanced robotics highlight growing economic and geopolitical influence, reinforcing China’s position as a central player in the global supply chain.
China’s focus on clean energy technologies, such as solar cells and battery production, aligns with global shifts towards sustainability, positioning it as a leader in the green economy and renewable energy sectors.
China’s business environment is highly competitive, with local companies rapidly scaling up to dominate industries like electric vehicles, AI, and microchips, making it a challenging market for Western firms to penetrate without comprehensive strategic planning.
The central government plays a crucial role in fostering industrial growth through substantial investments, subsidies, and regulatory support, helping Chinese firms expand globally and innovate across multiple sectors.
China offers significant business opportunities, though foreign companies must navigate complex regulatory and intellectual property environments, and consider ongoing geopolitical shifts when operating in the market.
Overview & Key Trends
The COVID-19 era in China was marked by three years of nationwide shutdowns, stringent quarantines, and a sharp decline in domestic consumption. Key sectors like manufacturing, transportation, tourism, and retail saw significant downturns, while foreign businesses faced severe market access challenges, including restrictions on interprovincial movement and prolonged operational disruptions. With supply chains paralysed and international trade ground to a halt, many businesses struggled to navigate the complexities of the evolving economic landscape. Despite these challenges—exacerbated by rising youth unemployment, a sluggish property sector, and an aging population—China’s resilience has surfaced, offering new opportunities for business and investment.
While ongoing geopolitical tensions prevail, and export controls ensue, China remains the top trading partner to over 120 countries worldwide, offering tax breaks, land subsidies, and funding to foreign investors. In fact, China saw over 1,150,000 international companies register in the Mainland by August 2023. With this number climbing, it is essential that businesses strategically reposition themselves, particularly in sensitive sectors like semiconductors, AI and renewables, which are increasingly affected by bilateral sanctions and trade restrictions. To succeed in this new environment, foreign entities must adapt to changing regulatory landscapes and emerging market trends, leveraging local partnerships and investing in core growth areas to thrive. In this context, exploring opportunities in digital transformation, innovation and advanced technologies can help businesses remain competitive and aligned with market developments.
International trade remains robust, though foreign direct investment (FDI) has declined. Western businesses are increasingly adopting a ‘China + 1’ strategy, moving operations to neighbouring countries like Vietnam and India to diversify risk, while maintaining a foothold in China. At the same time, China’s efforts to reshore supply chains and strengthen self-sufficiency have accelerated, alongside domestic spending initiatives and interest rate cuts, reflecting a strategic push to retain dominance as a global powerhouse. Recent steps taken, such as the digital yuan (e-CNY) rollout, assignment of regionally specialised cities that foster autonomy, and development of stock markets for high-tech industries underscore China’s commitment to distinguish itself as a leader of strategic advancement. For investors, it is not the time to ‘lie flat;’ there is much to look forward to.
Strength Industries
1) Technology & the Metaverse
Emerging as a frontrunner in technology and the metaverse, it is no secret that China has ambitious goals to transform the digital world. Boasting a remarkable concentration of unicorns, a quarter of which are dedicated to artificial intelligence and semiconductors, ByteDance maintained its status as the top unicorn for a third consecutive year according to the Global Unicorn Index 2024, while titans Alibaba Group, JD.com and Pinduoduo dominate the e-Commerce scene. The boom has birthed new business models such as OMO (Online-Merge-Offline), while giving rise to livestreaming culture and influencer marketing through social media figureheads known as KOLs, or Key Opinion Leaders. Dubbed the ‘World’s Factory,’ China stands as the global manufacturing superpower, with Chinese manufacturing accounting for roughly 31.6% of the global total in 2024. This strength has also transferred to e-commerce, where the combined forces of lower production costs, high production capacity and supply chain supremacy has allowed China to adapt its prowess, innovate, and integrate its capabilities onto the global e-commerce scene. Cryptocurrency may face regulatory challenges, but blockchain has been granted priority status by Chinese policymakers, and Hong Kong has grown into a hotspot for Web3 and NFTs.
The case for AI, championed by Xi Jinping and powered by government funding, is made compelling by China’s matchless data collection and deep integration of AI across industry, be it in strawberry farming, self-driving cars, or medical imaging. The latest excitement surrounds DeepSeek and Qwen. Rolled out days after Trump took office, the two platforms are the newest entrants to rival ChatGPT and other Western models. The shift has created new opportunities for less visible businesses, particularly in rural and hard-to-reach areas. One can now locate telemedicine services in the mountains of Gansu, purchase humanoid robots that promise companionship for family elders, and benefit from gold-standard e-learning in snow-covered regions, where such opportunities may otherwise be difficult. The range of creative solutions for geographically restricted, demographically shifting and underserved areas by AI is expanding at speed, addressing unique challenges to improve quality of life across China.
Critical technologies, including nanoscale materials, photonic sensors and novel metamaterials, offer equally significant potential, with China recognised as leading in 37 of 44 competitive categories identified by world governments, including quantum and space technologies, advanced robotics, and drone technology. However, geopolitical sensitivities in these sectors keep the risk of new export controls, tariffs, and trade restrictions high. Businesses operating in these areas should consider adjusting supply chains, diversifying suppliers across multiple regions—including geopolitically neutral markets—and closely monitoring policy changes from the US, UK, Australia, and the EU to mitigate potential disruptions.
Current sanctions include ‘dual-use’ items, including semiconductor manufacturing equipment (SME), photolithography equipment, biotechnology products and supercomputing devices. Firms should also be cognisant of the role of the Central Government as an actor in the private sector. The best way to understand this dynamic is through Everything Apps, also known as Super-Apps. The most famous of these is WeChat, an all-in-one ecosystem where businesses can follow government accounts, subscribe to industry-specific newsletters, and stay abreast of unfolding trends within their respective niches. Non-Chinese speakers can also take advantage of the inbuilt translation function available across the app. The same is now true for lifestyle app Xiaohongshu (XHS), affectionately dubbed ‘RedNote’ by US users that flooded its feeds following a temporary TikTok ban. Around three million accounts were created in a single day on January 16th, with the so-called ‘TikTok Refugees’ making the app the most downloaded on the US App Store.
Companies that align with state priorities are typically able to access capital in the form of grants and secure more favourable loan conditions, while those deemed as less favourable may face more challenges. State-Owned Enterprises (SOEs) account for an estimated 25% of Chinese companies, with the degree of government ownership ranging from 10-100% across some 867,000 firms, or 68% of all registered businesses in China. SOEs feature heavily in banking and energy sectors, alongside manufacturing, transportation and other critical industries. For example, in oil and gas, giants China National Petroleum Corporation (CNPC), China National Offshore Oil Corporation (CNOOC), and China Petrochemical Corporation (Sinopec) hold the monopoly. During periods of economic difficulty, the Central Government may inject capital into underperforming SOEs or forfeit assets to stabilise the wider industry. Such measures aim to ensure that vital sectors can mitigate disruptions and maintain smooth operations. However, foreign investors should not be wholly deterred from activities in these areas, as China seeks to liberalise market access through a new Action Plan designed to attract foreign capital and enhance competitiveness. Joint ventures and minority stakes in SOEs are also possible, though regulatory requirements vary by sector.
China is home to the largest EV market worldwide, powering over 60% of all global sales. BYD continues to take top spot over rivals, boasting a market share of 34.1% in 2024. Golden Week, an 8-day holiday commemorating China’s National Day on October 1st, saw sales for the vehicles soar. Customers flocked to dealerships and showrooms in record numbers, incentivised by domestic spending initiatives like consumption vouchers and government subsidies of up to USD 2,735, on top of festive markdowns which turbocharged sales, not only in the automotive sector, but also for household appliances (149.1% YoY) and retail (9% YoY). The measures came as part of a multi-stranded stimulus package backing housing, stock markets, and interest rate cuts worth 800 billion yuan, or USD 113 billion. These positive ripple effects are expected to benefit overseas markets with strong ties to property, luxury goods, and natural resources essential for the energy transition, including France, Italy, Australia, Kazakhstan, Brazil, Chile, Gabon, Vietnam, and Indonesia. The trend continued into Chinese New Year, the most important festival on the lunar calendar, with overseas sales for BYD up 83.38% YoY.
Like Christmas, the Spring Festival has traditionally been a time of increased spending, not only within China and the Sinosphere, but across APAC, from Mongolia to Malaysia. Businesses will typically close for two weeks, and key stakeholders, including suppliers, may be unavailable during the festive period. Factories and warehouses are almost certain to close, while ports remain open with reduced capacity. Given the importance of China as a maritime power in global shipping, logistics, and cargo operations, even minor slowdowns can have far-reaching effects on the movement of goods worldwide, and freight costs can hike considerably. Thus, planning ahead of time and making conservative forecasts is important to avoid disappointments, though delays can still be expected for up to a month.
During Chinese New Year, it is common for offices to display traditional paper cuttings, called jianzhi, and to decorate with auspicious colours like red, yellow and gold, with lanterns commonplace. Imagery of dragons, plum blossoms, and fish are also commonly seen, as they represent good fortune, longevity, and abundance. If you are lucky, you may receive a hongbao, or red packet, containing cash. Building rapport and strengthening relationships is paramount to Chinese business culture, especially during this season, so a banquet provides an ideal setting for networking, or making guanxi. Maintaining face, or mianzi – upholding honour, reputation and dignity in social settings – feeds heavily into these practices. Offering prosperity wishes in Mandarin, Cantonese, and local dialects goes a long way in showing respect and goodwill. With spirits high, it is not the time to discuss negative topics like losses, debt or financial difficulties that may bring bad luck to business. In the same vein, serious business decisions are best postponed until after the festive period. In Chinese culture, special care should be taken around the number 4, considered unlucky in China due to its phonetic likeness to the written character for ‘death,’ with the number 8 considered as being very lucky.
2) Innovation
No discussion on Chinese technology would be complete without addressing semiconductors; the nucleus of all future-oriented sectors. Without them, key innovations like lithium-ion batteries and solar cells would be impossible to produce. As China seeks to become a semiconductor superpower, it has invested heavily into funds that can supercharge the industry and move it closer to the goal of self-determination. The most recent of these initiatives is Big Fund, which has infused USD 47.5 billion into financing China’s two largest chip foundries, Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Semiconductor. Together with Huawei, these companies hold important positions in the global semiconductor supply chain, notwithstanding export control restrictions and their inclusion on the US Entity List. Advanced lithography, important to chip design, remains a chasm in the market, though Shanghai Micro Electronics Equipment Group (SMEE) has taken proactive steps to strengthen Chinese offerings in this area. To capitalise on emerging opportunities, investors would be wise to monitor developments relevant to their interests, whether in design, memory, or manufacturing, and to explore partnerships with domestic firms.
Elsewhere, the country’s 5G leadership, with visions of 6G by 2030, underpins initiatives like the Internet of Things (IoT) and next-generation 'Internet of Feelings' that enhance connectivity and user experience. Investment in virtual and augmented reality (VR & AR) is also surging, revolutionising gaming and shopping experiences across the consumer base. These technologies are the backbone of the Digital Silk Road, a framework that empowers its signatories – officially 16 countries at present, with almost a third of Belt and Road partner countries involved on an informal basis – to enhance their technological architecture and access the latest innovations, in areas ranging from cloud computing to e-governance. China has so far provided an estimated USD 7 billion for telecommunications developments since 2013, and over USD 10 billion towards e-commerce and digital payments, alongside other arrangements. Businesses with a stake in finance, retail and TMT in particular stand to benefit greatly from access to this infrastructure.
In most Tier 1 and many Tier 2 cities in China, the digital economy thrives with widespread adoption of cashless payment systems like AliPay and WeChat Pay, making digital wallets the primary method for transactions in a country where QR codes integrate seamlessly into daily life, and bridge the gap between physical and digital worlds. They have evolved to serve diverse and innovative functions, and can now be found on pet tags, medical profiles, and utility bills. They are used to collect wedding gifts, and to educate consumers on the provenance of fresh produce, with their versatility connecting people to information and services.
Unveiling state-of-the-art systems, from solar parks to smart grids, China continues to strengthen its domestic clean energy landscape. Aside from advancing home-grown technologies, the country has also been investing heavily in green tech projects overseas in what has been described as a ‘tsunami’ of unmatched ODI. Since the beginning of 2023, China has dedicated USD 109.2 billion in outbound FDI toward solar, hydro and wind energy, as well as battery storage systems and other clean technologies, announcing an additional USD 30 billion budget for renewables in December. Notably, Chinese battery manufacturer CATL is poised to begin production in 2025 at what is anticipated to be Europe’s largest battery cell plant, located in Debrecen, Hungary, covering 221 hectares. Hungary has joined the ‘14+1’ initiative, and emerges as the biggest manufacturing hub for Huawei outside China, maintaining its position as the country’s top FDI destination.
In countries like Morocco and Thailand, where Chinese energy players increasingly look to set up shop, the surge has given rise to similar industrial hotspots. BYD has been instrumental in this influx, with international expansions to Mexico, Jordan, and KSA. Creative solutions in hydropower, including projects with fish-friendly designs, cascade dams and robot-managed plants should offer plentiful inspiration to forward-thinking boardrooms in the West. Despite reinstated tariffs brought in under the Biden administration, Chinese companies have continued to maintain an edge in the bifacial solar panels market. These green initiatives not only showcase a commitment to cleaner energy and the Paris Agreement, but reflect China’s growing influence in the global energy transition.
3) Rare Earths & Key Commodities
As China strides forward in next-generation innovation, its traditionally strong agricultural sector should also merit the attention of foreign business executives. Crucially, China holds the crown in global garlic, producing an estimated 70% of total supply, with export values reaching USD 2.2 billion from January to October 2023. Chinese apples and sweet potatoes are also regarded among the best in world commodity markets, with destinations spanning the Global South. In countries such as Ethiopia, the sweet potato often features in cooperation initiatives with China, enhancing both food security and local production, while tea, particularly green, black and oolong varieties, remains a key component of cultural diplomacy, serving as a tool to enhance Chinese soft power, with Russia, the United States and Japan standing as its largest importers.
Meanwhile, China is the undisputed leader in global critical minerals supply, extracting over 60% of the world’s rare earth elements, including lanthanum, cerium, and samarium. These minerals are crucial to China's priority industries, from EVs to advanced robotics, and play a strategic role in the country’s long-term economic and industrial ambitions. Investors will note recent tariff changes on dysprosium, an element found in alloys for neodymium-based magnets used in wind turbines, sonar systems and nuclear reactors. Similar materials like terbium, molybdenum and praseodymium are found in abundance in China, but are now subject to export controls that restrict their mining, refining and trading. This development follows a similar move on ‘superhard’ minerals gallium and germanium, which, together with antimony, face export bans to the United States effective December 3, 2024, with graphite also under review.
While domestic processing accounts for 85-90% of global refinement, China is actively seeking to diversify its sources and ensure a steady supply. This is most visible across hotspots in Africa, Latin America and Central Asia, in a strategy that not only sustains Chinese supply chain resilience, but emphasises the scale of China’s presence across global markets. Precious metals like gold, regulated through SOEs, have also seen mining expand into these regions. As geopolitical uncertainties rise, and as players like the US and EU take steps to reduce their dependence on Chinese minerals, businesses operating in this area would be wise to explore alternative destinations or enhance domestic capacity, in order to stay afloat amidst the tide of ‘resource nationalism’ reflected globally. This growing trend signals a competitive landscape where global supply could become more exorbitant and constrained. The EU Critical Raw Minerals Act is but one product of this shift, presenting a paradox in the push for a renewables agenda, where the very resources needed to drive the energy transition are sought, yet simultaneously are restricted.
In 2025, China’s critical minerals strategy presents both opportunities and risks for the international business community. Companies involved in extracting, processing or trading of these materials may find promising partnership or investment opportunities that align with Chinese resource security goals. However, they can also expect to navigate new challenges, including market volatility, regulatory shifts, and the broader implications of international trade rifts. Therefore, preparation and contingency will be key for long-term resilience and success.
Conclusion
China’s evolving business environment presents both unparalleled opportunities and significant challenges for foreign investors. With its leadership in advanced technology, clean energy, and critical commodities, China continues to shape global supply chains and innovation. However, shifting geopolitical dynamics, increasing regulatory scrutiny, and a push for self-sufficiency require businesses to navigate the market with strategic foresight.
Success in China now demands more than just capital investment—it requires adaptability, local partnerships, and an in-depth understanding of regulatory frameworks. Companies that align with Beijing’s priorities, leverage domestic innovation, and diversify their supply chains will be better positioned to thrive. At the same time, firms must remain aware of the evolving trade, intellectual property and compliance landscape. As China deepens its global economic influence, businesses must adopt a long-term perspective—balancing opportunity with risk, and resilience with agility. For those prepared to engage strategically, China remains a dynamic and rewarding market, but one that requires a carefully calibrated approach to unlock its full business potential.