China Once Welcomed Western Businesses; Now It ‘Tolerates’ Them

The Long March is part of mid-20^th-century Chinese history. And then there’s what might be called the more-recent Long Jump.

The latter occurred about 20 years ago when businesses from around the world, including automakers, leapt into China to set up shop in a fast-developing nation with a huge population (1.3 billion) that had put out the welcome mat for foreign investors.  

Today, circumstances are less cordial, even icy, as something like a new Cold War brews between China and the U.S. and some of its allies.

In retrospect, much of that original commercial eagerness to catapult into the Chinese market was rash, says Michael Dunne, founder and head of ZoZoGo, a consulting firm that advises automakers and suppliers about Asian markets.

“In a way, people stopped thinking,” he says of the eastward-ho mentality. “It was, ‘China! Let’s get there.’” Clear strategies often were lacking, he tells the Society of Automotive Analysts during an online presentation.

But many businesses, automotive and otherwise, did well in China, Dunne (pictured, below left) notes. “It was a phenomenal run.”

Michael Dunne (002)

But that has changed as geopolitical tensions loom. “In 2021, we are in the front end of a realignment of the U.S. and China,” Dunne says.

For example, as China continues to claim sovereignty over the South China Sea, the U.S. recently brokered an arms deal to provide Australia with nuclear-powered submarines to patrol that body of water.

“The message to China is, ‘It’s our neighborhood, too,’” Dunne says. Conversely, the feeling in China is, “‘It’s our time to shine.’”

As its domestic auto industry has developed, China has become the largest vehicle producer in the world. That’s at the expense of others, such as the South Korean brands Hyundai and its corporate cousin Kia. They were selling a million vehicles a year in China. Now, it’s a third of that, Dunne says.

He foresees a new era in which foreign automakers, their suppliers and other businesses will re-diversify investments elsewhere in the region, particularly in Southeast Asia where they would focus on technology initiatives more than vehicle sales. 

Spurred by government mandates, China has become the world’s top electric-vehicle market, getting an early jump on an automotive sector that’s taking off worldwide.

“If the (EV) race ended today, China would be the winner,” Dunne says. “Of the 6 million EVs in the world, half are in China, a third in Europe and 10% in the U.S. China is the king of the EV hill.” America’s current position as the EV underdog is “a little stunning to come to terms with, but the U.S. is stepping up” its EV product development and production.  

But U.S. EV sales are regionally skewed. “In California, you see Teslas everywhere,” he says, referring to the segment leader. “Two states over, they are nonexistent.”

Still, Dunne sees “a huge opportunity (for the U.S.) to compete against China and Europe for dominance in EVs and EV batteries.”

Teslas sell well in China. So do Apple electronics products. “But increasingly, China needs fewer and fewer Western companies,” Dunne says. “When it comes to EVs, China increasingly is saying, ‘We can do this ourselves.’ Across the board, China says, ‘Whatever the U.S. can do with EVs, we can do better.’”

He recalls those early days of two decades ago when China greeted Western companies, anxious to work with and learn from them.

“Now, we’re tolerated more than welcomed. It’s, ‘You’re here; what do we need from you?’ It won’t be a case of being shown to the door, but more of a wearing down to the point of some companies saying, ‘We’re out.’”

Steve Finlay is a retired WardsAuto senior editor. He can be reached at [email protected].