As trade tensions escalate, companies from the US have became more cautious in managing their operations in China. For some foreign firms in China, the future is now looking more enigmatic.

Yet it was not the country's 'normal' for a long time. Since the very beginning of the opening-up period, foreign companies have rushed to the mainland, to take their shares of the lucrative Chinese market, and to enjoy lax regulations.

EO Intelligence, the affiliated research institute of EqualOcean, published a report presenting 150 of the largest publicly-traded companies' penetration into China. While companies like Royal Philips (PHIA: AMS), HSBC (HSBC: NYSE) and Siemens (SIE: ETR) appear at the top of the list, MasterCard (MA: NYSE), Chevron (CVX: NYSE) and Phillips 66 (PSX: NYSE) float near the end.

A historical review of China's foreign capital influx

The report reveals that 210 companies, among the largest 250 global companies by the market capitalization, have already entered the Chinese market as of 2019. Among the 210 ventures, 25 companies preferred to establish partnerships and have yet to operate directly, a list including such names as the home improvement retailer The Home Depot (HD: NYSE) and the Canadian telecommunications giant Bell Canada (BCE: TSE).

The report did not include these indirectly operating companies in the ‘Top 150’ ranking.

Shaped by rooted reforms and paradigm shifts, overseas entities have entered the market for different reasons in different periods of Chinese history. 

Institutional merchants and foreign businesses took the field in China even before the establishment of the People's Republic of China, and not necessarily always via Hong Kong. Although most of the foreign companies, including HSBC, had played a major role in China's early-modern economic history via their operations in HK, some companies, such as Siemens, initiated their operations in mainland China.

Yet, the world's most populous country by then and now was completely reoriented in 1949. Following the establishment of the PRC, Chinese leaders set out to develop a socialist economy through direct government control. State-Owned Enterprises (SOEs) predominated in the mainland, and the country presumably was not the most feasible market for foreigners to provide any service, as they were not welcomed at that time.

Even in this period, 11 companies made their way to China through Hong Kong and Taiwan. Amongst them, Toyota (7203: TYO) first entered the Chinese market with its Crown model in 1964. Starting from 1978, the country was transformed again by the new leader, Deng Xiaoping.

China's WTO membership in 2001 accelerated the ‘opening up’ phase, and Chinese GDP grew fourfold by PPP from 1978 to 2008, marking an unprecedented economic success story.

136 foreign companies, among them the world's largest 250 publicly traded companies, rushed into China. It was a boon for the manufacturers, thanks to the country's relatively cheap labor; it was also a boon to the financial entities and pharmaceutical giants. 27 retailers, 22 financial institutes, 19 healthcare companies, 17 energy giants and 51 firms from various industries took their position in the mainland. 

Starting in 2009, in the aftermath of the global economic crisis, China's macro strategy and its positioning in the global economic-politic arena have yet again changed. The country has created a strong middle class and several global companies. The announcements of BRI in 2013, Alibaba's IPO in 2014, the launch of the ‘Made in China 2025’ plan in 2015 and the opening of ‘China's Nasdaq’ – the SSE StarBoard – were the products of the reorientation.

Yet, the country's demographics have been alarming since then. The strict family planning policy brought about a severe ageing population problem for 21st century China. Since 2008, 31 major companies have entered the mainland, led by eight pharmaceutical and biotechnology companies, as medical and healthcare sectors move to answer the needs of these elderly citizens, among other demands.

Ranking of the 150 foreign companies in China

EO Intelligence presents a ranking of the largest 150 publicly traded companies who have been operating in China based on how deeply they have penetrated the Chinese market.

Today's ‘Greater China region’ is considered as China for the ranking criteria during the historical assessment and final listing. 

99 companies have chosen Shanghai for their base in China. Beijing follows Shanghai with 59 companies and Hong Kong follows Beijing with six foreign companies. Guangdong province has attracted 10 top companies from different countries. 

To get access to China's rising middle-class, retailers led an influx of 28 companies, which was followed by the manufacturers who had been exploiting China's cheap labor for years; however, that window of opportunity has already closed due to the rising labor costs in China. The same phenomenon has started to spread around developing South-East Asian countries. The financial industry has brought 18 institutions into China during the period. 

Here is an excerpt taken from the list:

Amid trade tensions, foreign firms that have already been operating in China are bound to protect their businesses. The ones that are preparing to launch in the Chinese market will soon have a lot to learn from the firms in this ranking. 

EqualOcean will be scrutinizing the risks associated with these businesses and objectively provide opinions based on our enquiries. 

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For the original report, please look here.