China is undergoing a profound transformation from being the "world's factory" to a "global innovation hub," with its dual-carbon goals driving green transition and accelerated integration between digital and real economies creating unprecedented opportunities for multinational enterprises. Accurately gauging China's market pulse and strategically positioning for future sectors have become core issues for multinationals seeking sustainable development.
KPMG recently released the Chinese version of its "2025 China Outlook for Multinational Enterprises" report (hereinafter referred to as the "Report"). Based on in-depth surveys of 137 multinational corporations, the Report reveals new trends in their development strategies in China. Jiang Liqin, Partner in Charge of Clients & Markets at KPMG China, noted that China's structural innovation and industrial upgrades are prompting multinationals to reassess their China strategies.
The Report highlights that multinationals have expressed long-term confidence in China's market, with an increasing number shifting their strategic focus from pure expansion to profitability optimization. This includes enhancing operational efficiency through localized innovation and digital investments, refining pricing strategies, and improving profit margins to build competitive advantages.
**Over 90% of Companies Prioritize Digital Transformation** Digital transformation is reshaping production, lifestyles, and governance models, aligning not only with corporate strategies but also with China's national priorities. Amid intensifying market competition and rapid technological advancements, digital transformation has become a critical lever for multinationals to boost competitiveness.
According to the Report, over 90% of surveyed companies plan (or have already begun) digital investments, with 52% prioritizing "strengthening data analytics capabilities," 46% focusing on "upgrading IT infrastructure," and 36% actively "investing in emerging technologies." In AI adoption, 58% of multinationals have integrated AI tools into their operations.
Cybersecurity has emerged as a strategic enabler for China's digital transformation. However, differences between domestic and international cybersecurity standards pose operational and compliance challenges as multinationals seek to globalize technologies developed in China. Bridging these gaps is essential for maintaining trust and resilience. Companies must adjust governance frameworks, enhance cross-border collaboration, and embed cybersecurity at every innovation stage to achieve secure and sustainable growth.
**Surge in M&A Activity Reflects Confidence in China** Sector-wise, most multinationals anticipate a clear economic recovery in China over the short to medium term, expressing optimism about revenue growth prospects in the next three to five years. Notably, 94% continue to invest in China, while 75% plan to maintain or increase investments in mainland China by 2025.
Mark Harrison, Co-Leader of Multinational Corridors at KPMG China, observed a significant rise in M&A activity over the past six months, driven by two key strategies. First, global multinationals are acquiring high-performing firms in sectors like EVs, medtech, biotech, water technology, advanced materials, and robotics to unlock global potential and leverage production capabilities. Second, in consumer-facing industries, multinationals are vertically integrating by acquiring distributors, agents, and OEMs to better understand and serve Chinese consumers amid fierce local competition.
As China enters its 15th Five-Year Plan period and advances institutional openness, multinationals face not only a strategic window to deepen their presence but also a pivotal transition from participants to co-builders. Digital transformation now extends beyond technological upgrades—depth of digital insights and resilience in compliance are becoming core competencies for integrating into China's high-quality development. Only through technological empowerment, compliant operations, and strategic synergy can multinationals truly evolve from "entering" to "embedding" in China's market, growing alongside its economy.
Comments