Why foreign firms struggle to break into China

FOR growth-starved Western entrepreneurs, the Chinese market is appealing. Think about it: Since 1995, China's economy has grown by a factor of 18.5, from US$735 billion to US$13.6 trillion (excluding Hong Kong). In terms of purchasing power parity, it is now the No. 1 economy in the world.

Accordingly, many foreign companies have gone out of their way to build supply chains within the country and go-to-market mechanisms in order to access its market. American firms across industries have invested more than US$276 billion in China since 1990; in 2018, foreign direct investments from all countries flowing into China reached US$139 billion.

Despite these investments, only some Western companies have been able to make large inroads in the Middle Kingdom. For example, Coca-Cola, which has been in China for 40 years, now sells 140 million servings of soda in the country a day; since 2012, China has been General Motors' largest retail sales market; although sales have since slowed down, the Greater China region was Apple's third largest source of revenues in 2018; buoyed by brisk sales and despite the existence of copycats, Lego is planning to open 80 new shops in China this year.