At GTR UK 2025, I was asked: Is it easier or harder for Western companies to do business in China now? With only 30 seconds to respond then, here’s my detailed take on the reality versus common perceptions for 2025.

China’s business landscape has evolved significantly, offering new opportunities for foreign companies. However, challenges like local competition and geopolitical risks persist. Below, we explore what’s changed and what hasn’t.

Why It’s Easier for Western Companies to Do Business in China

China has made strides to create a more welcoming environment for foreign investment. Here are the key improvements:

1. Stronger Intellectual Property (IP) Protection

IP concerns once topped the list for Western businesses. Since China joined the World Trade Organization (WTO) over two decades ago, IP enforcement has improved significantly. In 2025, foreign companies face fewer violations and find it easier to protect their rights. Compensation for IP infringements is higher, and licensing is now a viable business model. Learn more about IP strategies in China.

2. Supportive Regulatory Environment

As of late 2024, China lifted all restrictions on foreign investment in manufacturing. Many sectors are now in the “Encouraged” category, per China’s National Development and Reform Commission. Policies on data-sharing between multinationals’ China operations and global headquarters have also relaxed, easing compliance burdens.

3. Lower Costs for Market Entry

Starting a business in China is now more affordable. Legally required capital thresholds for a business license are minimal in most sectors. Digital tools like WeChat, DingTalk, and Zoom enable real-time communication and contract approvals, reducing the need for costly on-site teams or frequent travel. This makes market testing more accessible.

4. Streamlined Administrative Processes

AI-enabled systems and competition among cities to attract investment have slashed bureaucratic hurdles. Setting up a Wholly Foreign-Owned Enterprise (WFOE) once took six months and dozens of approvals. Now, one-stop service centers in many cities complete the process in weeks. Read our guide to WFOE setup (#) [internal link] for details.

5. More Location Options

Expanded high-speed rail and digital infrastructure make second- and third-tier cities like Dongguan (an hour from Shenzhen) attractive for businesses. These locations offer strong talent pools and logistics at lower costs than Shanghai or Beijing. For example, we recently helped a client establish a manufacturing plant in Dongguan.

6. Reduced Language Barriers

English-speaking talent is increasingly common in urban and tech hubs. This lowers communication barriers with local partners, suppliers, and customers, though cultural nuances still require attention.

Persistent Challenges for Western Companies

Despite improvements, some hurdles remain:

1. Non-Tariff Barriers

While tariffs and licensing have eased since China’s WTO entry, sectors like healthcare, publishing, and creative industries face complex approval processes. These non-tariff barriers can delay market entry.

2. Local Regulatory Inconsistencies

National policies vary by city, and smaller foreign firms often lack the local relationships that Chinese competitors leverage. This makes compliance more challenging.

3. Limited Policy Transparency

Foreign companies are rarely consulted before new regulations are introduced, unlike their local counterparts. This can slow adaptation to policy changes.

Growing Challenges in China’s Market

Some aspects of doing business in China have become tougher:

1. Fierce Domestic Competition

Chinese firms are closing the gap with Western companies, excelling in product localization, speed to market, and cost efficiency. This intensifies competition across industries.

2. Geopolitical Tensions

Political friction between China and Western countries can lead to reputational risks or exclusion from public procurement. Neutral companies may still face consumer backlash. For insights on navigating geopolitical risks, see my recent talk with Pascal Coppens on the dramatic changes in China’s business environment, technology landscape, emerging trends, and shifting geopolitical backdrops.

Is Now the Time to Enter China’s Market?

Doing business in China in 2025 is easier in many ways, thanks to stronger IP protection, streamlined processes, and lower entry costs. However, challenges like local competition and geopolitical risks require careful strategy. For Western companies serious about this critical market, now is a compelling time to act.

SUCCEED IN CHINA

At Crayfish, we provide tailored solutions to help you succeed in China and are always happy to discuss how we can support. Get in touch and book a free initial consultation with our specialist team.