As more Chinese companies expand abroad, foreign businesses are asking whether they should stay — and McKinsey’s top leaders in the region have an unconventional answer: yes.
In their new book, “The Next China Is Still China: An Insider’s Playbook for Winning in the New Era,” McKinsey’s Nick Leung and Joe Ngai argue that China is not headed for Japan-style stagnation or a major decoupling from the U.S. They point to the country’s global manufacturing dominance and its heavy spending on frontier technology as key reasons for optimism — a contrast to the prevailing gloom about a sluggish consumer, a lingering property downturn and supply chain diversification.
Joe Ngai, senior partner and chairman of McKinsey’s offices in Greater China, told CNBC that the disappointment many multinationals feel today is partly a reflection of their own past dominance. For two decades, foreign companies often held a bigger market share in China than in other overseas markets, he said, and that era is over.
But local Chinese rivals are also feeling the squeeze, Ngai noted, citing hyper-competition, or “involution,” in the slowing economy. Winning longer term, he said, requires investing in China to stay relevant in its vast consumer market — and that relevance increasingly matters elsewhere, as Chinese companies themselves expand globally.
New opportunities in AI
One bright spot is AI-powered education. Lingverse COO Anita Wang told CNBC the company plans to launch its owl-themed reading companion in the U.S. this fall, and is talking to some Florida school districts about using its AI-powered learning device during field trips and other activities.
Chinese companies face their own headwinds despite rapid global growth. Beverage and budget drinks chain Mixue has opened four times as many stores as Dunkin’ Donuts, but shares tumbled last week after cost of sales grew faster than revenue, driving a 14.7% profit drop in the first half of the year.
Since the pandemic, China’s retail sales have grown at less than half the pace of prior years. Starbucks has sold a majority stake in its local operations, and other U.S. giants have downsized amid geopolitical tensions.
Ngai said many foreign businesses are talking with Chinese private equity firms about local partnerships, but “more discussions are going on rather than deals being struck.”
Every industry is different, he said, with sensitive areas like tech requiring their own guardrails. But the McKinsey leaders’ conclusion, after years of executives searching for alternatives, is that China will be hard to ignore.
— CNBC’s Jenny Lee contributed to this report.
Source: www.cnbc.com — https://www.cnbc.com/2026/08/31/cnbc-china-connection-newsletter-mckinseys-contrarian-view-economy.html
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