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Multinationals such as LVMH, Volkswagen and L'Oréal are facing falling sales, fierce competition and economic challenges in China as they evaluate strategies to survive the slowdown in the world's second-largest economy.
China, once seen as the world’s economic engine, is now facing headwinds that are challenging its position as a key market for global companies. After decades of explosive growth and unprecedented transformation, the world’s second-largest economy is now in a state of stagnation. Are we witnessing the end of the modern “Silk Road”?
In recent years, several Western multinationals began to reevaluate their presence in the Asian giant. Reasons such as the economic crisis, geopolitical tensions and fierce competition are leading companies to rethink their strategies. But what exactly is happening and which sectors are being most affected?
The impact of China's economy on the world
Between 2001 and 2020, China impressed the world by growing its GDP from $1,2 trillion to more than $15 trillion. As a result, it consolidated its position as the second largest global economy and threatened the leadership of the United States. However, the post-pandemic period has revealed structural weaknesses that are undermining the country's growth.
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Real estate market crises, rising corporate debt and low domestic demand are some of the obstacles that China needs to overcome. Consumer confidence is shaken, and this directly affects the global market, as the country is one of the largest consumers of luxury goods, food and technology.
The economic slowdown in China is not just affecting the Internal market, but it also shakes the economies that depend on it as their main trading partner. The crisis in the real estate market, for example, is not just an internal issue, but a time bomb that could affect global banks and investors.
The strategic exit of Western companies
The luxury sector, which has always counted on China as one of its most lucrative markets, is suffering. Brands such as LVMH, Kering and Hermès have seen sales fall as Chinese consumers change their behavior. After years of high spending, especially among the wealthy, local consumers are now more cautious.
Actions such as expanding online sales and opening new stores have been attempts by brands to minimize losses, but consumer confidence is still far from being recovered.
Airlines have not escaped the crisis either. Companies such as Finnair, British Airways and Lufthansa have drastically reduced their routes to China. Increased costs due to the closure of Russian airspace, combined with low demand, have made these operations less viable.
Not even giants like L'Oréal are immune. The drop in demand for beauty and skincare products is forcing companies to adapt their strategies, such as reducing prices and reconfiguring their sales channels.
The trade war and the automakers
The rise of Chinese brands like BYD has put Western giants like Volkswagen and Tesla in an awkward position. Strong local competition is reshaping the automotive market, especially in the electric car segment.
In response to increased tariffs imposed by the US and Europe, the Chinese government has adopted retaliatory measures, further increasing the climate of tension. These disputes directly impact sectors such as food and beverages, in addition to increasing the cost of products for global consumers.
Strategies for dealing with the crisis
Companies like Danone and Nestlé are investing in more specialized products to stay competitive. Price cuts and the expansion of digital channels have been common strategies to attract consumers.
While some companies are leaving the market, others, like Apple, continue to invest heavily, offering aggressive discounts and strengthening local partnerships.
The relationship between technological innovation and local competition
Tech companies like Apple face the challenge of competing with local brands that offer equally advanced products but at more affordable prices. This fierce competition is forcing Western giants to diversify their operations and invest in other markets, such as India.
China remains an economic powerhouse, but the days of unbridled growth seem to be behind it. For Western companies, reducing their presence in the country is as much a matter of survival as of adapting to a changing global landscape.
Does the end of the modern “Silk Road” mean the beginning of a new era for the economy world? What is clear is that the world is learning to navigate without depending so much on the Asian giant.
It was over, now these measures will no longer be effective. You have already achieved what you wanted, which was to absorb Western technology. The greed of capitalism has tasted its own medicine. It underestimated the Chinese, thinking that they were Latin America, and thought that they would always just copy what the West sent to manufacture there more cheaply. But the Chinese have invested heavily in education and research for decades, since the 50s, and here is the result.
Now Inês is dead. They forgot the phrase that Napoleon said about China.
The Chinese have already done it*
This situation is extremely common in the economy. Stability does not exist! (Thank God for that).
Unfortunately, China had to surrender to capitalism in order to grow.
China today has a combination that no one else has, the competition of capitalism, and the organization and discipline, controlled with an iron fist, of radical communism.
This article makes no sense at all.
No company leaves such a large market just because its economy is being disrupted. The companies themselves are also making an assessment and making decisions about how to act in this time of crisis. So they are fighting to enter because they have a billion motivations and now they are going to expand everything.
China gave what it had to give, India will soon dominate all this development that China was having, a communist country has growth limitations, the bubble is bursting, half a dozen billionaires, the command of high communism and the rest, slaves of the government.