Dr. Mark Michelson is chairman of IMA Asia (Hong Kong), part of a network originally founded in Australia in 1990, which now is headquartered in Singapore. It serves CEOs as a sounding board and source of first-hand business intelligence, by convening peer group forums. These are organized around through CEOs, CFOs and direct reports to China or Asia.

This article offers insights from over 200 heads of China business in the IMA Asia China CEO Forum and is based on forum sessions in late 2025. All quotations in italics have been anonymized to respect the Chatham House rule, which allows participants to share information but prohibits them from revealing the identity or affiliation of speakers. 

China’s place in global business is shifting, with executives managing the operations of international companies there navigating tougher questions from their boards and C-suites. Recent conversations among executives in IMA Asia’s China CEO Forum have explored China’s rapidly evolving role in today’s global economy and its implications for international companies, identifying themes and pressure points that matter most to them.

After decades of stellar economic growth, many global firms were on autopilot when the Chinese economy took a hit two years ago. But old expectations die hard; hope still lingers for a return to those heady days. One Shanghai-based CEO describes the China focus of his and other MNCs:

“Headquarters became accustomed to strong growth and fat margins from China. The Covid years reinforced this, as exports surged in 2021 and China’s consumption outpaced that of other regions. HQs continued to rely on their China operations for more growth and margins. Since 2023, those expectations have repeatedly fallen short.” 

For many of the world’s largest firms, the China operation has been among the most profitable and important. But the Chinese slowdown made them – and leading stock markets – jittery. Another executive said:

“China remains one of the biggest contributors to multinational revenues and profits…for several firms, 10–30 % of global sales come from China, with profit shares often higher. That exposure means that any signal from China—policy, growth data, or consumer sentiment—can have an outsized effect on global market valuations.”

In response, firms pivoted quickly to insulate their China business from the ravages of geopolitics and the trade war — but have not fully adapted to the economic changes within China. Business models ended to be overly reliant on the China growth story and needed to be updated.

Headline growth of around 5% is masking a deeper problem: deflationary pressure. Chinese manufacturing strength has become, to some extent, a structural drag, characterized by overcapacity, price wars and involution. An increasing concern is that China’s manufacturing engine is running too hot. A system optimized for employment and production, not profit, is making private firms behave like state actors.

At the same time, competition is growing from privately-owned Chinese companies (POEs). Competition from SOEs has long been a challenge, driven by overcapacity and price wars. But the rise of aggressive, private-sector challengers marks a new phase.

What are some ways to turn the economy around? Is there a silver bullet?

Old hopes die hard #1

International business leaders are seeking signs that the Chinese economy will become more market-oriented, especially now that the US-China trade war is temporarily on hold. One Forum member provided an ‘economic prescription’.

“Beyond geopolitics settling down, a combination of two things is required. First, solid growth, especially domestic demand. Second, structural reforms that clarify a real separation between business and the state.”

Leveling the playing field remains on the wish list for corporate executives, such as by allowing inefficient firms to go bankrupt. Said a forum member:

“SOEs, private Chinese firms, and foreign firms should all be treated the same. China is a fiercely competitive market. We don’t mind competing if the rules are fair. Institutional reforms are key. Take overcapacity: if capital is endlessly patient, bankruptcies are avoided, and the market never clears.”

International businesses also hope for more robust enforcement of intellectual property, as articulated by a manufacturer in China:

“Continued improvement in IP protection is vital. Courts are making better, fact-based decisions—sometimes slowly, but progress is there. The real issue is enforcement. If China strengthens that, multinationals will keep expanding R&D and innovation centers here.”

Structural market-based reforms occur in fits and starts, only as they serve Beijing’s economic goals. Rebalancing – shifting from an emphasis on production to consumption, from supply to demand – was put on hold after 2015. Now it could time to resume the effort.

Government leadership is back to advocating for rebalancing the economy. Recent policy measures are promising, though small, and need clear direction. As one forum member summed it up:

“The direction matters: shifting the growth pattern is essential to better align supply and demand in the economy.”

However, a level playing field is not on offer. Most foreign firms need to be realistic and pragmatic about the market share they are permitted to hold and impediments to success. Said one executive:

“There is a consistent pattern. The Chinese government commits to opening new markets—and it does, eventually. But openings come after Chinese firms are established. In a sector there will be at least one central-run state-owned enterprise, a couple of provincial SOEs, and maybe one or two private firms. For newcomers, good luck.”

Another China CEO urges prudence about regulatory rollbacks:

“Take telecommunications – some restrictions were removed recently, but not much has changed. Publications? Same story. Some segments were taken off the negative list. But is it meaningful? I’m cautious.”

Old hopes die hard #2

Some continue to pin their hopes on Chinese consumers regaining enough confidence to unleash their substantial savings – and revive China’s USD 7 trillion consumer market.

“Over the past 15 years, Chinese consumers have been the world’s growth engine – driving riving the world’s biggest markets for cars and luxury goods. Now, momentum has stalled. Savings rates are unusually high because households are cautious.”

Some companies are hoping mainly for government stimulus. Others look for a recovery in home prices and social safety net reforms to restore confidence. So, they’re looking for answers to some basic questions.

“Over the next five years, what will revive consumer spending? Does it hinge on a property market rebound? Do we need stronger real wage growth? Or should policymakers expand pensions, health care, and social security so households feel safe enough to spend?” asked one executive. 

A consensus is emerging that programs that make households and individuals feel secure enough to spend their savings are critical. As one forum member observed:

“Long term, the bigger challenge is confidence. Fiscal stimulus can spark a temporary boost, but sustainable consumption depends on structural reforms that reduce the need for precautionary savings. That means giving urban migrants better access to health care, education, social security, and housing.”

Yet government programs are not rolling out at a sufficient scale — and are unlikely to do so, at least in the short term.  More has to be done to encourage consumers to spend a larger part of their considerable disposable income. 

“We’ve seen a few encouraging signs,” said one executive, “such as new funding for public education—but much more is needed. Only when people feel secure about the future will they lower their savings rate and spend more.”

The bottom line

China is undergoing a significant economic transition, and international business leaders must adapt. Basing China strategy on unrealistic, outdated expectations makes it more likely that strategic decisions won’t capitalize on the larger trends and opportunities.

Beijing’s approach goes beyond market liberalization or promoting consumption, although these will remain as smaller initiatives. Its next act is about generating wealth through productivity. To achieve this, government and private sector leaders are placing big bets on innovation, advanced manufacturing and technology, specifically Artificial Intelligence (AI). 

The government looks likely to continue pushing manufacturing up the value chain, even at the expense of consumption. Its game plan appears to be to go all-in on an advanced economy powered by “new productive forces” and innovation, capable of sustaining higher wages for its people. Said another forum member:

“It is not sustainable for China to push for a consumption-led economy, and they don’t have the tax base to fund large-scale social programs. They are looking to innovation to boost incomes and provide more manufacturing-adjacent service jobs.”

The takeaway

As China re-engineers its economy, China CEOs need to find alignment that their firms can leverage.  One executive pointed to a way forward:

“China wants to promote entrepreneurialism, enable its people to earn greater returns from their assets, and raise incomes. Foreign firms that are contributing to these goals have the greatest opportunities.”

If manufacturing has matured, and consumption remains cautious, will services be the next frontier? China’s services sector has grown to over half of GDP. But this is a lower share than in advanced economies – signaling room to expand. 

Chinese firms often face gaps in capability and regulatory requirements for services. For foreign firms that can navigate access barriers, there are meaningful opportunities.

The upside 

The government is cautiously opening service sectors to foreign participation, like in healthcare, financial services and tourism. This move has given rise to cautious optimism among some international executives in China.

“Recent policy moves show that China wants its service sector to become a new growth engine — and that qualified foreign firms will have a role to play. If you take the optimistic view, foreign companies could again help raise capabilities — much as they did in manufacturing two decades ago — though the path will likely be slower and more selective.”

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