US Fast-Food Chains Want a Bite Out of China’s 1.4 Billion Population

In recent times, we’ve seen some of the world’s leading brands such as Apple, Samsung, and Adidas steer away from manufacturing in China due to the strained relationship between Washington and Beijing. However U.S. fast-food chains are keen to expand to reach the country’s large population, reports Business Insider.

The parent company of KFC China opened its 10,000th restaurant in the country this month, with plans to open more to capture the country’s huge population in the next two years. McDonald’s also has extensive plans to open 3,500 restaurants across China over the next four years. Meanwhile, Starbucks has put down a $220 million investment in a manufacturing and distribution department in eastern China, which is its biggest project outside the U.S.

When Chinese President Xi Jinping was in San Francisco for a summit last month, he shared a slightly different plan on how American CEOs could benefit from China’s “super-large market,” as fast food doesn’t quite fit with China’s blueprint.

Phil Levy, chief economist at the supply chain management firm Flexport, said, “As you try to interpret the signals from McDonald’s and Starbucks,” as well as other chains, “note what the industries are: These are not high-tech burgers.”

Although some U.S. companies are investing in China to tap into its huge economy, overall investments from abroad have slowed down significantly during the course of this year. Between July and September, net foreign direct investment in China dropped rapidly to a deficit of $11.8 billion, which is the first quarterly deficit since 1998 when Beijing began publishing this data.

Many multinational companies are finding other options and moving investments away from the country. This has left China in a position where it is not yet able to fully recover from the setbacks from the pandemic as well as the crisis in the property market, which has slowed down significantly.

In November, McDonald’s CEO Chris Kempczinski said, “We believe there is no better time to simplify our structure, given the tremendous opportunity to capture increased demand and further benefit from our fastest-growing market’s long-term potential.” He also highlighted that the company is increasing its minority 20% ownership of its McDonald’s licensed stores in China, Macau, and Hong Kong to 48%.

China’s large population is key for many foreign companies. Speaking at its annual investors day gathering this month, McDonald’s executives said that 70 million of the 150 million customers active in its customer loyalty program are in China.