Whether it's a ride-share app, a search engine, or a social media platform, tech companies have struggled to expand their businesses overseas. Many successful U.S. tech companies expect to thrive in the world's second largest economy, but the results have been less than satisfactory.

According to a statistic posted by the Harvard Business School, "48% of foreign corporations fail and withdraw from China within two years of starting operations." Why is this economy so difficult to adjust to? There are multiple reasons this may be the case, starting with the fact that China often recreates it's own versions of U.S. companies, therefore eliminating the need for the original U.S. company. Furthermore, the Chinese government has gone so far as to ban popular online platforms from even being used in China.

For the companies that do evade these initial barriers, they then have to face the backlash of being seen as the foreign company compared to local competition, and are then subject to scrutiny under the public's eye. Furthermore, the recent president to take office in China has placed less emphasis on attracting foreign companies and more on supporting local ones. This funnel of resources and support into local companies has removed much of the desire for foreign establishment and investment.

The size of China's economy, originally seen as supporting high chances of success, is making it harder for foreign companies to come in and rise to the top of their fields. By the time many companies establish themselves there, they realize there are already numerous comparable companies, forcing them to close their doors within months. Companies like these will either sell their operations to a locally based one, or withdraw from China altogether.

Share this article