China and the U.S. have a complicated economic relationship: competitive but codependent. But as tensions between Beijing and Washington rise, U.S. companies targeting China for future growth are facing strong headwinds. Just consider three core holdings in the portfolio: Apple , Starbucks , and Nvidia . All three companies maintain strong ties to the world’s second-largest economy. Nvidia generates 21% of its overall revenue from Mainland China, while Apple gets 19%, and Starbucks 9%. More importantly, all view China’s growing middle class as a still relatively untapped market for its products. And in the case of Apple, the place where most of its products are now made. But there’s no denying the in-country competition is heating up — a trend that has been intensified by the leaders of both countries. Trump-era export controls, tariffs on Chinese goods, and President Joe Biden’s focus on tech, specifically restricting certain U.S. investment in Chinese entities like semiconductors and restricting the export of cutting-edge AI chips, have all contributed. Meanwhile, Xi Jinping, president of the People’s Republic, continues to push for China’s economic independence — especially when it comes to tech. A sluggish economic recovery from the Covid pandemic lockdowns has also made local brands more attractive to deal-hungry consumers. Competition for the iPhone heats up For Apple, that has meant a more saturated smartphone market, with domestic players like Huawei spin-off Honor, Oppo and Vivo offering cheaper alternatives to its flagship iPhone. Sales for the iPhone dropped 30% year over year in early 2024, according to Jefferies last month. Sales for rivals such as Huawei have “remained much stronger,” the analysts wrote. In Apple’s December quarter , China was the weak spot, down 13% and coming in short of expectations. At the state level, media reports of Chinese government iPhone bans emerged last year. Although Chinese officials have denied these claims, the…
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