Fortune favors the bold: How multinationals can profit from China's future

The start of 2025 has brought a clearer sense of urgency and direction for multinational corporations operating in China. As I reflect on recent conversations with friends in various industries, one dominant theme stands out: transformation.

We are not talking here about incremental changes, but rather sweeping realignment that is reshaping business strategies in response to a fast-evolving environment.

Beneath the headlines of layoffs and business line closures lies a more profound story: the quiet birth of new ventures, strategic pivots and a recalibration of priorities.

These developments underscore one undeniable reality – China remains a market that multinational corporations cannot afford to ignore. But succeeding here demands a level of agility and vision that many are still struggling to achieve.

From decline to determination: lessons from the automotive sector

In the past few years, the "easy money" era in China definitively ended. Multinational corporations, accustomed to swift returns, have faced unprecedented disruptions. Declining consumer confidence, fierce local competition and the rapid pace of technological innovation have upended business models.

Yet, as we enter 2025, the focus is shifting from despair to action. Companies are recognizing that the time for deep introspection is over; it is time to act.

The automotive sector offers a stark example of this crucial crossroad. Foreign automakers, once dominant in China, now grapple with declining sales and waning influence. Their plight stems not just from the rise of Chinese electric vehicle manufacturers but also from their own inertia. Domestic rivals have demonstrated unmatched agility in innovation, production and market responsiveness, while global industry giants have struggled to keep pace.

The lesson is clear. Success in China requires more than legacy prestige. It demands a willingness to embrace change, act decisively and absorb local insights into global strategies. For multinational corporations, the automotive sector's upheaval serves as both a warning sign and a roadmap.

'China for China:' a strategic imperative

Central to this transformation is a growing consensus around the doctrine of "China for China." This concept, once a catchphrase, is now a strategic cornerstone for many multinationals.

At its core, it emphasizes building comprehensive, self-sustaining ecosystems within China – spanning supply chains, research and development, production and sales. The goal is clear: resilience, responsiveness and relevance in an increasingly competitive and localized market.

This shift is not just theoretical. Early in January, senior executives of some Global Fortune 500 companies arrived in China to visit partners and reaffirm their commitment to local integration. Public statements echoed the consistent theme that "China for China" is here to stay, not as a reactive measure but as a proactive strategy.

However, rhetoric alone is insufficient. Companies must demonstrate commitment through tangible actions. Local partnerships need to be expanded, investment in innovation needs to expand, and companies need to align with China's broader economic goals. This approach not only enhances competitiveness but also solidifies trust among stakeholders, from consumers to government bodies.

Breaking entrenched corporate mindsets can be difficult. Too often, multinational corporations view China through the lens of short-term risk rather than long-term opportunity. To succeed, businesses must reframe their approach, integrating China's high-quality development strategy into their global playbooks. As history has shown, those who bet on China's potential reap enduring rewards.

China's innovation goes global

A transformative trend reshaping global business is the rise of Chinese innovation. Not long ago, the idea of China leading in cutting-edge technologies was met with skepticism. Today, it is a reality. Multinational corporations are increasingly licensing innovative drugs, technologies and solutions from Chinese companies for global markets.

What was once an exception is now a trend. Over the past year, quite a few foreign pharmaceutical giants acquired rights to commercialize experimental drugs developed by Chinese biotech startups. These deals signify more than commercial transactions; they represent a profound shift in global innovation dynamics. China is no longer just a market; it is a source of world-class solutions.

This evolution speaks to a deeper recognition among global executives that China's innovation ecosystem is becoming a cornerstone of their global strategies. While these collaborations will take time to bear fruit, they underscore the increasing integration of Chinese ingenuity into multinational operations. For companies willing to engage with China's trend-setting landscape, the potential rewards are immense.

Shanghai: vanguard of resilience and reinvention

Amid these sweeping changes, Shanghai stands as a beacon of resilience and reinvention. The city, long a hub for foreign investment, continues to lead by example.

Recent initiatives highlight its commitment to fostering a forward-looking business environment. For instance, in 2024, wholly foreign-owned companies in Shanghai grew 10.7 percent, while traditional joint ventures declined 4.8 percent. This shift reflects foreign investors' preference for autonomy and high-quality, long-term projects.

Shanghai's proactive policies reinforce its status as a global innovation and investment hub. Recent efforts to attract wholly foreign-owned hospitals and encourage global automakers to establish electric car production facilities demonstrate the city's commitment to high-value, sustainable growth. These initiatives signal a clear message: Shanghai is not resting on its laurels, but rather is continually evolving to meet new challenges and create new opportunities.

The city's ability to adapt and innovate offers valuable lessons for multinational corporations. Success in Shanghai – and by extension, China – requires a deep understanding of local dynamics, an openness to collaboration and a commitment to long-term value creation.

Patience, courage and vision: the long game

As businesses navigate this transformational period, the path to success will demand more than just operational adjustments. It will require a shift in mindset, away from short-term metrics and toward sustainable, long-term growth. This journey will not be easy. It calls for patience, courage and an unwavering belief in the future.

For multinational corporations, the rewards of this approach extend far beyond financial returns. By aligning with China's ambitions and investing in its potential, businesses can position themselves as true partners in the country's next chapter of development.

Ultimately, the winners in this new era will be those who embrace a long-term perspective, demonstrate agility and foresight, and invest in building meaningful connections with Chinese markets, partners and people.

As the saying goes, "fortune favors the bold." In China, it also favors the patient and the committed.

(The author is an adjunct research fellow at the Research Center for Global Public Opinion of China, Shanghai International Studies University. He's also founding partner of 3am Consulting, a consultancy that specializes in global communications.)