Global corporations have begun joining hands with Chinese capital to survive in the China market. From Starbucks to Häagen-Dazs, Decathlon, and GE HealthCare, marquee global brands are handing over equity in their China units to local private equity (PE) firms or seeking partnerships.
According to the Financial Times (FT) in the U.K. on the 17th, global corporations are actively reviewing plans to hand over operating rights for their China businesses to private equity firms. The move is seen as a strategy to break through a "threefold hardship" of intensifying local competition, a slowing Chinese economy, and increasingly unstable U.S.-China relations after U.S. President Donald Trump took office.
Starbucks, the world's largest coffee chain, recently agreed to sell 60% equity in its China business to Hong Kong-based private equity firm Boyu Capital. Boyu Capital, founded by Jiang Zhicheng, the grandson of former Chinese President Jiang Zemin, wields strong influence in the Chinese-speaking world.
The transaction size amounts to $2.4 billion (about 3.48 trillion won). In exchange for handing over more than half of the equity, Starbucks will receive a portion of China sales as royalties. Starbucks and Boyu Capital have set an aggressive goal to increase the number of stores in China—now around 8,000—to more than 20,000 in the coming years.
General Mills, which owns the "ice cream powerhouse" Häagen-Dazs, is seeking a new owner to operate roughly 400 Häagen-Dazs stores in China. French sports retail giant Decathlon is also sounding out investor interest to sell part of its China equity. GE HealthCare, which posted $2.4 billion (about 3.48 trillion won) in sales in China alone last year, is seen as a big fish considering a partitioning sale of its business units.
In addition, coffee brands Peet's and Costa, owned by The Coca-Cola Company, and Japanese convenience store chain Lawson are also said to be weighing options to restructure their China businesses. An executive at a private equity firm, who requested anonymity, said, "Many global corporations' boards considered exiting China when U.S.-China relations deteriorated in 2023, but now they are recognizing again that 'it is valuable to have a local partner.'"
The biggest reason global brands are lowering their noses and reaching out to local capital is the surge of Chinese homegrown corporations. Experts agree that China is no longer a market where you can make money just by hanging a global brand sign as in the past.
Homegrown Chinese coffee brand Luckin Coffee, backed by low prices and a mobile ordering system, now operates three times as many stores as the combined total of Starbucks, Peet's, and Costa. In the convenience store sector, the Chinese homegrown brand Meiyijia has outpaced its Japanese rivals by an overwhelming margin.
The prolonged slump in China's economy has also played a part. Shaun Rein, founder of China Market Research Group, said, "A prolonged real estate downturn has made consumers in smaller cities more pessimistic," adding, "Western fast-food brands are no longer a cheap dining-out option for Chinese consumers."
According to a survey conducted in Sep. by the American Chamber of Commerce in Shanghai, only 41% of member U.S. corporations were optimistic about their business outlook in China, the lowest on record. Member companies cited U.S.-China tensions as the biggest threat. Intensifying competition in China followed.
Frank Tang, chairman of FountainVest Partners, said, "China is a rapidly changing, hyper-competitive market," adding, "If foreign brands fail to adapt quickly, it will be difficult to sustain their China businesses for long."