China used to be a cash cow for western companies. Now it's a test lab.

turn to price cuts to entice shoppers.

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‘Another challenge: Heightened U.S.-China tensions are leading some corporate headquarters to exercise more caution on China-related decisions, which can slow operations.

“In China, success depends on how fast you can turn the steering wheel. But for many multinationals, the wheel is in the U.S. where the instinct is to hit the brakes, not the gas,” said Han Lin, China country director at consulting firm the Asia Group.

‘Fitness center’

The fierce competition is perhaps most apparent in China’s auto industry , where price wars have broken out and local companies have taken market share from long-dominant foreign car brands.

Volkswagen was once the top carmaker in China, but homegrown brand BYD took the crown in 2023. Volkswagen's vehicle deliveries in China fell 7% in the latest quarter from a year earlier, the latest in a string of weak results in the country.

Volkswagen has likened China to a “fitness center” for the company. The German automaker is doubling down on its “in China, for China” strategy of developing and manufacturing products in the country for Chinese consumers. At a recent import expo in Shanghai, Volkswagen said it is developing its own chip for advanced driver-assistance systems and autonomous driving through a joint venture with a Chinese firm.