Big brands used to see China as a dream market with incredible potential, but for many it’s turned into a commercial nightmare. From tech giants and airlines to luxury fashion houses, key overseas players are struggling like never before as a perfect storm of factors upends their business in the country.

Read on to discover why China is proving such a challenge for these consumer powerhouses and find out which famous names are suffering the most.

All dollar amounts in US dollars

When it comes to China, foreign brands are facing headwinds from all directions. With the nation's economy spluttering, Chinese buyers have tightened their belts. Amid sluggish growth, a severe property market crisis and high youth unemployment, confidence is subdued, and spending is down across the board, especially on discretionary items.

Another serious challenge to foreign companies is rising competition from domestic brands. Homegrown rivals tend to beat their global counterparts on price, making them increasingly attractive to thrifty Chinese consumers.

And as if the People's Republic’s stumbling economy and fierce domestic competition weren't enough to contend with, foreign brands now have another massive problem to contend with. Geopolitical tensions between China and the West are hammering business.

In particular, President Trump has applied new tariffs of 20% on all Chinese exports to the US – and Beijing is retaliating with its own measures. The effect of this escalating trade war is a downturn in international trade, but it’s also fuelling anti-Western sentiment at a grassroots level: Rising nationalism is prompting many buyers in China to shun foreign names in favour of local alternatives, and there have even been mass consumer boycotts of certain global brands.

The trend even has a name: Guochao, which means "National Tide". It's also been called "China Chic". Particularly popular among Chinese Gen Zs and Millennials, it reflects a growing preference for Chinese brands, artwork, and culture.

Yet another perplexing problem for overseas brands, specifically those in the luxury sector, is a move away from flaunting wealth and flashy labels, which are suddenly regarded as decadent and vulgar. Many big brands have quit the Chinese market of late. And for those staying put, the situation is looking increasingly bleak...

Take Samsung. The South Korean electronics titan became the world's smartphone leader after overtaking Apple last year. Yet its share of the Chinese market nosedived. Its signature Galaxy model has slumped to less than 5% of the market, while in January, home-grown Huawei became China’s best-seller, followed by another domestic brand, Vivo.

Mounting domestic competition and the high cost of Samsung's wares are partly to blame, especially since a Chinese government subsidy for electronics purchases is restricted to the lower end of the market. However, the company's struggle in China is also due to geopolitics. As reported by tech news site DigiTimes Asia, it's been the target of Chinese boycotts of South Korean firms as a result of the controversial deployment of a US missile defence system in South Korea in 2016.

Samsung has also been hurt by the patriotic "Buy Chinese" movement that arose in 2020 as relations between China and the US soured.

Western airlines are leaving China in their droves. In May last year, Qantas threw in the towel when it announced plans to scrap its sole route to Mainland China. The Sydney to Shanghai flight was established amid great optimism in 2004. Qantas subsequently enjoyed a heyday during the late 2010s when it also operated services to Beijing, as well as additional routes in collaboration with Chinese partners. As recently as 2017, it had 14 weekly flights.

However, demand crashed during the COVID-19 pandemic and never recovered due to China's economic downturn. According to industry website AirlineGeeks, geopolitical tensions and strategic errors could have contributed to Qantas' exit, along with a decision by the Australian regulator to prevent the airline from renewing its contract with its last remaining local partner.

Virgin Atlantic followed suit in July 2024 when it ended its 25-year London Heathrow to Shanghai service, citing “significant challenges and complexities”. The airline reported losses of $178 million (£139m) in 2023, with the poorly performing Chinese route no doubt contributing to the shortfall. Virgin had already axed its almost 30-year-old Hong Kong route the year before.

Like most European carriers, Richard Branson's airline is barred from Russian airspace, forcing longer, more costly routes to China. Chinese carriers, on the other hand, can still fly over Russia and now have a massive competitive advantage. Given the absence of a level playing field, it's little wonder Western airlines are bailing. Scandinavian Airlines is another that’s pulled out entirely, while Lufthansa and British Airways have scaled back their services.

China is the world’s second biggest beauty market after the United States, but foreign prestige brands are having a tough time there as cash-strapped shoppers dial back on premium purchases. Meanwhile, local C-Beauty brands, which are budget-friendly and targeted at the domestic market, are flourishing.

Over the past couple of years alone, 20 overseas cosmetics brands have left China due to poor sales, including Maybelline and Innisfree, according to the news website The China Academy. Estée Lauder is staying put. But its parent company, which counts Clinique, MAC and other big names in its portfolio, has lowered its sales outlook due to poor demand in China. It’s now focusing on the mass market rather than luxury products – most recently introducing its The Ordinary science-based brand – and hoping for the best.

Japanese beauty brand Shiseido is also flagging, with a weaker duty-free market thanks to poor consumer confidence only adding to its agony. Year-on-year profits to the end of December were down a staggering 73% from 28 billion Japanese yen ($190m/£147m) to just 7.6 billion ($51.2m/£39.6m). The company’s business in China slumped nearly 5% over the year, and further decline is expected this year.

Shiseido's situation is especially dire because of a Chinese consumer boycott of Japanese products triggered by Japan's release of treated radioactive water from the stricken Fukushima plant in 2023. Sales plummeted and have continued to flounder since.

Since it opened its first branch there in 1999, Starbucks has been credited with helping China move from an exclusive tea-drinking nation to one that appreciates coffee too. It now has over 7,000 outlets, making the vast country its second most important market after the US. Yet its business in the PRC desperately needs a pick-me-up. Sales were down 8% in fiscal year 2024.

Starbucks fields a more premium offering than many competitors so it remains more expensive, despite being locked into a brutal price war with domestic arch-rival Luckin Coffee. The Chinese brand seems to be prevailing – it ended 2024 with three times as many branches across the country. The American chain says it’s now exploring co-operation with a local partner in order to understand the market more intimately and turn its fortunes around.

Danish jewellery brand Pandora was riding high in the Chinese market in the late 2010s. In 2019, the world's biggest jeweller by volume turned over $283 million (£220m) in China, representing 9% of its global revenue. It’s fallen significantly since then, and last year, its Chinese sales tumbled by yet another 10%. It now enjoys just 1% of the potential market there. The inevitable response is a contraction: Pandora plans to close 50 of its almost 200 Chinese stores.

Part of the company’s problem is that it offers neither the cache of a top-level luxury brand nor the bargain prices of domestic competitors. Meanwhile, Chinese consumers, especially Gen Z, are avoiding its sterling-silver charm bracelets for high-carat gold, particularly in the form of tiny beans, which make for reliable nest eggs in uncertain times. As highlighted by consumer trends website Jing Daily, Pandora also went overboard with product releases, losing its cachet and overwhelming customers with too much choice. As younger customers began to keep their distance, it focused too heavily on collaborations with the likes of Disney and Marvel, further alienating more mature clientele.

Nike's sales in China increased by 6% year on year to the third quarter of 2024, but the sportswear titan's market share is at risk of being gobbled up – not least by agile local players Anta and Li-Ning which are capitalising on the Guochao trend for homegrown companies. According to analysis by Swiss bank UBS, the brand is unlikely to enjoy strong Chinese performance in the near future and will likely see "slow growth with little margin rebound over the next couple years”.

That said, Nike isn't taking the onslaught lying down. Its efforts to fend off the competition include opening a flashy flagship store in Beijing, collaborations exclusive to the Chinese market and holding its second Nike On Air event in Shanghai last year.

Western fast-fashion and mid-range clothing brands are feeling the pinch in China as frugal consumers embrace Guochao and turn to cheaper local alternatives such as Shein and Taobao.

German-born brand Esprit expects a loss of $150 million (£116m) for 2024, following a $298 million (£231) loss the previous year. It’s suffered harshly in Europe, where it's since declared bankruptcy. However, the Chinese market has been so difficult that the brand's parent company is attempting to offload its entire Greater China operations, according to industry websites Just Style and FashionUnited.

ASOS' short-lived misadventure in China ended in 2016 when the British online fast-fashion retailer shuttered its Shanghai warehouse and pulled out of the country. Lack of brand recognition and intense competition from Alibaba and other local rivals were among the factors that led to its demise in the People's Republic. But though it no longer operates in the country, ASOS still has one very big China problem: Shein.

The Chinese fast-fashion juggernaut – which doubled its profits last year – is stealing away ASOS' Gen Z customers and its market share, even in its home market. According to marketing analysts Global Data, it’s now expected to overtake ASOS as the UK’s sixth-largest clothing retailer as soon as 2027, pushing its British rival into 10th place.

Brands at the highest end of fashion are faring poorly too. With the economy in the doldrums, Chinese consumers are spending less on expensive items. But there's another factor concerning the CEOs of high-end goods firms: "luxury shame".

Beijing has launched a clampdown on flaunting wealth, including banning the flashiest fashion influencers from social media. Showing off is now a nonstarter. And given the Guochao trend, consumers in China are increasingly gravitating towards homegrown luxury brands. LVMH, which includes Louis Vuitton, Dior and numerous other ultra-premium brands, is feeling the pain. Its sales in Asia, excluding Japan, which account for almost a third of its international revenue, fell 11% last year.

In another blow to Louis Vuitton, cash-strapped Gen-Z Chinese are turning to so-called "pingti" products, high-quality replicas or "dupes" of luxury brand goods with a much lower price tag.

Like Louis Vuitton, Gucci trades off its status-symbol monogrammed styles that are instantly recognisable as signifiers of wealth. Now that conspicuous displays of consumption are frowned upon in China, and as the pingti trend gathers momentum, Gucci is understandably a no-no for many consumers.

Last year, profit at Gucci parent Kering, whose other brands range from Yves Saint Laurent to Balenciaga, plunged by 62%, thanks in large part to softening demand in China. Gucci accounts for half the group’s sales and up to two-thirds of its profits, so turning the brand around will be crucial.

Burberry has been in much the same boat. Famed for its iconic check pattern, the luxury British fashion brand slumped in China last year, its most important market with 65 stores. Its sales there fell 19% compared to 2023.

Perceived as overpriced, Burberry was criticised when a $460 (£358) hot water bottle went viral on social media site Weibo, inspiring the hashtag #Burberry won’t get a penny from me. On a positive note, wealthy Chinese consumers are reportedly travelling to Japan to take advantage of the weak yen and snap up luxury items there instead. Meanwhile, a new CEO is hoping to turn around the company’s fortunes.

Hugo Boss shares Burberry's pain. In November, the German fashion house repeated earlier warnings that it won’t meet its 2025 sales or profit targets, partly due to sluggish demand in China. At the same time, it reported quarterly Asia-Pacific sales figures that were down 7%.

Not every luxury brand is struggling in the People's Republic though. Hermès, Prada and Ralph Lauren have seen their revenues pick up. Unlike their flashier rivals, these relatively understated brands are synonymous with so-called quiet luxury, putting them in a better position to deal with the backlash against conspicuous consumption.

Staying with luxury products, high-end Western watch brands like Omega are in dire straits in China despite doing well in other parts of the world, and flashing a pricey new wristwatch is no longer advisable in the People's Republic.

In the second half of 2024 the Swatch Group, which owns the Omega brand, reported a 30% drop in its sales in the wider Chinese region, including Hong Kong and Macau, while the region’s share of its total business also fell to 27%, down from 33% the previous year. The company has cut production by 20% as demand has withered. The silver lining is that sales of Swatch Group's more affordable brands, such as Swatch and Tissot, could hold up better as Chinese consumers opt for more affordable, less ostentatious timepieces.

Tesla sales in China, its second-biggest market, have been under tremendous strain recently. In February, the US electric carmaker delivered almost 50% fewer vehicles than the same period in 2024, according to figures from the China Passenger Car Association.

China's economic slowdown is a major factor in Tesla's woes, but increased local competition is the bigger issue. BYD, China’s biggest automaker and the American brand's greatest rival, is going from strength to strength and seems to be prevailing in a fierce price war. It’s now announced the inclusion of smart driver assistance features in even its lower-priced models, a move that’s led other Chinese manufacturers to do the same. Tesla’s Chinese models have smart features too, but at a much higher price.

A further headwind is some customers’ aversion to the political activities of Tesla’s CEO, Elon Musk, especially at a time when his close ally Donald Trump is targeting China with trade sanctions.

Volkswagen is also coming up short in China. The Chinese market is its most profitable region, accounting for a third of VW Group sales. Last year, those sales fell 10% with local manufacturers beating it on cost, features and general appeal to the Chinese public. In January, one iteration of its ID7 electric model shifted just nine units – a drop of over 96% year on year. This is undoubtedly an anomaly, but it must have shocked executives at the German company.

Volkswagen is not giving up. It’s announced plans to develop a joint venture with China’s biggest battery maker CATL to explore making cheaper batteries, plus the potential for battery swapping, which could dispense with the need for time-consuming recharges. It’s also planning to launch an economy electric vehicle to challenge affordable Chinese competition in its own European backyard. VW is the world’s biggest carmaker by revenue, so if it doesn’t succeed, there’s not much hope for anyone else.

General Motors is another Western carmaker fighting to retain its market share in China. It’s been co-operating there with a local partner SAIC, but this venture turned a loss of $347 million (£269m) in the first nine months of last year. Last December, GM warned shareholders that it had incurred a write-down of more than $5 billion (£3.9bn), including restructuring costs and lower business valuations.

Part of the restructuring involves closing a factory in Shenyang. GM hopes it can turn things around by moving away from the mass market and focusing on premium and luxury brands like Cadillac and Buick. In other words, sell less but for more money. In today’s ever-more price-conscious and mercurial Chinese car market, that seems like a brave move.  

Likewise, Toyota is trying and mostly failing to weather the economic downturn and keep up with the local competition in China, with its market share on the wane. It sold nearly 1.8 million vehicles there last year, meaning the People’s Republic is its second most important market after the US. Yet the impressive number still reflects a 6.9% drop in Chinese sales.

Toyota is a latecomer to the electric vehicle market, which will explain some of the fall as Chinese car markers churn out affordable electric cars. But a Chinese consumer boycott of Japanese products triggered by the 2023 release of contaminated Fukushima water into the Pacific may also have contributed to Toyota's recent muted performance.

The Japanese car giant – still the largest in the world by volume – will begin production at a new Lexus EV plant in Shanghai in 2027 in a bid to address some of its Chinese issues.

In March 2024, foreign chipmakers were dealt a blow when the Chinese government blocked overseas-made semiconductors from its PCs and servers. Among the most affected by the ban was Intel. Last year, the company generated $15.5 billion (£12bn) in the People's Republic, 29% of its total global revenue. The US government has imposed export controls, with more reportedly in the pipeline. At the same time, there are fears that China could target the tech giant with an anti-trust investigation as a means of retaliating against Donald Trump’s tariff regime.

Intel is now doubling down on expanding its US operations, which seems wise given the hurdles it faces in China.

China is also a major market for fellow US chipmaker AMD. In 2023, the People's Republic accounted for 15% of its global sales total of $22.7 billion (£17.7bn).

Like Intel, AMD is caught in the crosshairs of the US-China trade war. Restrictions are piling up on both sides as America seeks to prevent China from accessing advanced semiconductor technology, and China responds by shutting out US chipmakers. Both firms have seen their share prices fall due to tight regulations and will have an even rougher ride if they're further impeded from doing business in China.

Apple's troubles in China appear to be never-ending. The nation's economic woes have translated to fewer sales of the US tech giant's premium products, while local upstarts are biting chunks out of its market share. In September, Apple saw the launch of its new iPhone 16 overshadowed within hours after Huawei unveiled a new tri-fold smartphone. Since then, and amid a cooling smartphone market, the cheaper iPhone 16e seems to have had a lukewarm reception too.  

Apple has introduced discounts to pep up sales but has plenty of other issues to tackle, including how to get around a Chinese ban on its AI features, which could lead to even fewer sales. The firm recently announced a partnership with Alibaba in a bid to solve the problem. China is Apple's third biggest market and accounted for 17% of its revenues last year, so the sales dip is bad news for the company. Apple is also being hit by the US-China trade war and is moving much of its production out of the People's Republic, presumably at a heavy cost.

Now explore the US-China tech war and discover who's winning