As China’s consumer market continues to struggle and government controls tighten, global companies are withdrawing or restructuring their operations in the country. The ongoing downturn in consumer spending is causing significant shifts in the retail sector, prompting businesses to exit the market or restructure their operations.
According to reports from Chinese media and major foreign news outlets, IBM announced plans to close its research and development (R&D) department in China and relocate it to India. This move is expected to impact over 1,000 employees. Analysts believe this decision is driven by several factors: the rapid growth of domestic competitors, government initiatives to promote domestic products, and worsening business conditions due to U.S.-China tensions. IBM’s sales in China fell by 19.6% last year.
The decline in domestic demand also severely affects the food and beverage industry, prompting many companies to downsize or leave the Chinese market altogether.
Din Tai Fung, a globally recognized dim sum chain, announced on its website that it will only operate 14 stores in China, including those in Beijing, until October. This decision is due to the expiration of its business license with Beijing Hengtai Fung Catering Co., resulting in the closure of these 14 branches. However, locations in Shanghai, Jiangsu Province, Zhejiang Province, and Guangdong Province remain open as they partner with other Chinese companies. Bloomberg News reported that Din Tai Fung’s decision to reduce its stores is linked to fierce restaurant price competition due to slowing consumer spending in China. Bloomberg highlighted a “mismatch,” noting that while upscale restaurants are offering buffets and fast-food chains are offering items for $1 (approximately 1,330 KRW), Din Tai Fung, which costs about 150 yuan (around 28,000 KRW) per person, is not competitive in the current market.
The impact of the consumption slump is significant, but China’s e-commerce penetration is also driving rapid changes in the retail landscape.
Microsoft Corporation decided to close all its official offline stores in China last month and focus on online sales. The company is shifting its product portfolio towards digital products, including gaming and entertainment, and is rapidly moving its sales operations online.
Major retail outlets are experiencing mixed fortunes. French health and beauty retailer Sephora reportedly plans to lay off 3 to 10% of its 4,000 employees in China. Carrefour, another large French retailer, withdrew from China years ago and now operates fewer than ten stores there. According to the Yomiuri Shimbun, Japanese fast-food chain Mos Burger also announced last month that it would exit the Chinese market.
Despite these challenges, Walmart, the largest retailer in the U.S., continues to expand its membership-based Sam’s Club in China. Walmart operates 48 Sam’s Club stores nationwide, with sales increasing by 17.7% year-over-year in the second quarter. Recently, Walmart has been working to expand its presence in China, including selling about 5% of its stake in Chinese e-commerce company JD.com.
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