Global firms in China go local as trade, tech flare-ups threaten operations

Despite escalating efforts from the United States and its allies to clamp down on trade, international companies with an interest in the still-sizeable Chinese market are adopting a new plan of action to stay engaged while keeping themselves insulated from unexpected geopolitical shocks, analysts said.

The strategy, dubbed “in China for China”, is an integrative process by which foreign businesses design, develop and produce wholly within the country to sell to local clients.

It is becoming one of few viable choices for many multinationals – particularly those in tech and manufacturing – said Xin Qiang, a professor at Fudan University’s Institute of International Studies in Shanghai.

“It is not an option for many to give up the Chinese market. Going forward, many foreign firms will, to some extent, segregate China from their other operations,” he said.

The company is mulling the construction of China-specific chip supply chains as it juggles compliance requirements from Western governments and its commitments to the world’s second-largest economy, according to reports by Bloomberg and others. Andy Micallef, NXP’s executive vice-president, was quoted as saying the company will build a fully local supply chain with customers that want domestic manufacturing capacity.