McKinsey leaders say companies still need a China plan

McKinsey’s top China voices are warning global companies against treating China as a market they can replace. Joe Ngai, McKinsey’s Greater China chair, and Nick Leung, director of the McKinsey Global Institute, told Fortune that China’s consumer base, factory depth and local competition still make it central to corporate strategy.

Their argument comes as foreign companies reassess China after weak consumption, a property slump and rising geopolitical risk, Fortune reported. Ngai and Leung make the case in their new book, The Next China is Still China: An Insider’s Playbook for Winning in the New Era, according to Fortune.

Ngai told Fortune that companies seeking another country to replace China will not find one with the same scale. He said boards and chief executives still need a specific China strategy rather than assuming Vietnam, India or another market can fill the same role.

Local rivals have changed the rules

Fortune reported that Ngai and Leung see China as a difficult, crowded and price-sensitive market where foreign brands no longer enjoy the advantages they held for roughly two decades. Companies such as Nike, Starbucks and Volkswagen face tougher competition from Chinese businesses, while Apple competes with Huawei and Xiaomi, and automakers such as General Motors, Honda and Volkswagen contend with BYD and Geely.

Ngai told Fortune that foreign brands once benefited because Chinese consumers paid extra for global products that local companies could not match. He said that advantage has been eroded by competition.

Chinese entrepreneurs can often make decisions faster than multinational managers who must seek approval from headquarters in cities such as Tokyo, Stuttgart or New York, Ngai told Fortune. Leung said companies that give more power to local China teams and treat the country operation as a stand-alone business are better placed to compete.

Fortune cited Coach and Logitech as examples of Western brands using a “China for China” approach. It also reported that Volkswagen and Stellantis have partnered with Chinese companies, while Starbucks and General Mills have sold China businesses to local investors.

Price wars are taking a toll

Ngai and Leung rejected the idea that Chinese corporate success can be explained mainly by state subsidies, Fortune reported. They pointed instead to decades of entrepreneurship, low-cost credit and competition among local governments that helped create many domestic champions.

That intensity has brought costly price wars, according to Fortune. BYD, described by Fortune as the world’s largest electric-vehicle maker, has cut prices several times and reported a 55% drop in first-quarter net profit this year.

Fortune also reported that JD.com’s push into food delivery against Meituan and Alibaba led the three companies to commit more than 100 billion yuan, or $14 billion, to subsidies and discounts over two quarters. Meituan has posted three straight quarters of net losses, according to Fortune.

China’s state-run Economic Daily criticized that food delivery fight in March, saying the industry had entered a cycle of losing money to win share and was hurting the recovery in consumption, Fortune reported.

China’s global push meets branding limits

Chinese companies are gaining ground abroad in Europe, Southeast Asia and Latin America, Fortune reported. BYD sold more than 1 million vehicles outside China in 2025, according to Fortune.

Leung told Fortune that Chinese companies still struggle to build brands that appeal emotionally to consumers overseas. He cited Coca-Cola as an example of a company whose value rests heavily on brand connection.

Fortune reported that some Chinese companies are experimenting with that shift, including game developer MiHoYo, Luckin Coffee in New York City and sportswear company Li Ning, which signed an endorsement deal with Steph Curry.

Ngai told Fortune that artificial intelligence could become another China export, pointing to models from companies such as DeepSeek, Moonshot AI and MiniMax. Fortune reported that Chinese AI tokens have surpassed U.S. tokens on some global marketplaces.

A slower economy, but not a write-off

China’s economy remains below the pace of earlier decades, Fortune reported. Retail sales rose 0.2% in April, the weakest rate since December 2022, while industrial output increased 4.1%, below expectations.

Ngai told Fortune that China is likely in a longer period of 4% to 5% growth and trending lower. Leung said the country is still in a reset rather than facing Japan-style decline.

Fortune reported that President Donald Trump’s May visit to Beijing produced no major trade breakthrough, though China agreed to buy 200 Boeing planes. Leung told Fortune that even limited stability between Washington and Beijing is preferable to further deterioration.

This story draws on original reporting from Fortune.