What Global Executives Should Know About China in 2026

China has had quite the roller coaster ride in recent years. 2025 was a challenging year for the nation, marked by geopolitical tensions and slow domestic demand. By the middle of the year, new tariffs and trade disputes forced significant changes, impacting trade on an unprecedented level. But by late 2025, the mood shifted. China’s annual trade surplus reached a record high of over $1 trillion, with a steady GDP growth of around 5%. This shows that while challenges remain, China is finding its footing in an ever-shifting global landscape.

As we look to 2026, often dubbed the Year of the Horse, it’s crucial for global executives to understand that it’s not just about the latest headlines regarding tariffs and real estate issues. There are deeper trends shaping China’s economic future that demand careful attention. Here are five pressing questions for those with their eyes on China’s market.

1. How Will Tariff Uncertainty Affect Your Strategy in China?

China has been a powerhouse in global manufacturing, mainly due to its cost-effectiveness and interconnected supply chains. Despite U.S. tariffs stabilizing around 50% in 2025, China’s trade hasn’t drastically faltered. In fact, its share of global goods exports remains steady at about 14%. The country has expanded its trading relationships, with only 2-3% of its GDP reliant on U.S. exports. As of now, much of China’s exports head to developing economies in ASEAN, Latin America, the Middle East, and Africa.

Going forward, it’s essential for multinational companies operating in China to be flexible. Supply chains will need to adapt swiftly to the changes happening in the market. How resilient is your strategy to potential shifts in tariffs and trading patterns?

2. Where Are Chinese Consumers Spending Money?

In the years leading up to 2025, Chinese consumers were known for their robust spending, contributing nearly double-digit growth in retail yearly. However, as confidence dwindled in 2025, with youth unemployment rates soaring to about 15%, consumers redirected their spending. While certain areas like tourism and box office revenue saw healthy growth—12% and 22% respectively—overall discretionary purchases struggled.

For global brands, the key lies in tapping into the significant household savings that many Chinese consumers hold. With shoppers looking for value and quality in their purchases, simply competing on price will not suffice. Offering something genuinely worthwhile will be the key to unlocking this potential market.

3. Can Your Business Stand Out in China’s Competitive Market?

Despite the pressures of deflation, China’s market remains fiercely competitive. By 2025, around 30% of large industrial firms reported losses, increasing from 20% pre-pandemic. Companies are facing what is known locally as “involution”—a scenario where intense competition erodes profit margins across various sectors.

However, a decrease in excessive investment may actually signal a much-needed correction in the market. Brands must now innovate through technology, branding, and high-quality services rather than relying solely on low prices. Success in China can translate into a competitive edge on a global scale, so businesses must be adaptive to thrive.

4. Are You Prepared for Chinese Competitors Internationally?

Over the years, China has been a magnet for foreign capital. But recent trends suggest that Chinese companies are becoming key players in global markets. Between 2022 and 2025, foreign direct investment announcements into China dropped significantly, while outbound investments remained steady at around $100 billion annually.

Expect increased competition from Chinese brands even in your home markets. They are not just targeting emerging economies; they are looking to establish themselves in Western markets with competitively priced and culturally relevant offerings. Are you ready to face this competition head-on?

5. How Will Chinese AI Transform Productivity?

Before 2025, the focus on artificial intelligence (AI) and technology innovation primarily rested with Silicon Valley. However, China is rapidly emerging as a leader in AI technology. Major companies, such as Alibaba, are rolling out competitive AI models that can rival those from the U.S. The surge of agile startups also indicates that China is pushing the envelope in terms of innovation.

The question for businesses is whether this technological capability will lead to substantial productivity improvements. According to research, China’s companies could significantly influence GDP growth by 2040 through effective AI implementation across sectors. Are you prepared to adopt or adapt to these advancements?

Looking Ahead

As we move into 2026, China faces several challenges, including geopolitical uncertainties and a struggling real estate market. Still, the scale, innovation, and global influence that China offers remain attractive. The businesses that will succeed in China will be those that can make their operations resilient and effective, standing out in a competitive environment while leveraging the country’s innovation landscape.

For global executives aiming for success in the Year of the Horse, being prepared and disciplined in navigating China’s market trends will be essential.

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Original Text – https://fortune.com/2026/01/11/what-global-executives-need-to-ask-about-china-in-2026/