Multinational Corporations Continue Investment in China Amid Geopolitical Tensions

A recent KPMG survey indicates that three in four multinational corporations (MNCs) operating in mainland China have either maintained or increased their investments in 2025. This survey, which polled 137 senior executives between June and September, reveals that only 1% of respondents are preparing to exit the Chinese market. Approximately 20% of MNCs indicated they might reduce their investments, while the remainder remains undecided. Companies planning to expand are focusing on greenfield investments, mergers and acquisitions (M&A), and joint ventures to deepen their presence in China. Mark Harrison, a partner at KPMG in China, noted a significant uptick in M&A activities among MNCs, particularly in high-performing sectors such as electric vehicles, medical technology, biotechnology, water technology, advanced materials, and robotics.

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The industrial manufacturing and automotive sectors are particularly attractive to MNCs. In consumer-facing sectors, companies are pursuing vertical integration by acquiring distributors, agents, and original equipment manufacturers to better understand and serve Chinese consumers. This strategic shift is largely driven by the need to adapt to fierce local competition and challenging market dynamics.

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The ongoing M&A activities reflect a broader trend where CEOs are adjusting to technological and geopolitical disruptions. Liz Claydon, KPMG’s global head of deal advisory, stated that the current M&A cycle is in its third year of a projected seven-year trajectory, with expectations for continued growth in 2026 and 2027. The global M&A volume for 2025 is projected to reach USD 4.81 trillion, bolstered by 70 megadeals exceeding USD 10 billion.

‘We’re about year three’ into seven-year M&A cycle – KPMG’s Liz Claydon, with Lucinda Guthrie – podcast

Despite the optimism surrounding M&A activities, there are concerns regarding the geopolitical tensions between the United States and China. Critics argue that these tensions could impact the long-term sustainability of foreign investments in China. The potential for increased regulatory scrutiny and trade barriers may deter some companies from fully committing to the Chinese market.

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KPMG's Mark Harrison emphasized the importance of understanding local market dynamics, stating, “MNCs are pursuing vertical integration to better understand and serve Chinese consumers.” Liz Claydon also highlighted the role of technological advancements in shaping M&A strategies, noting that “CEOs worldwide have adjusted to technological and geopolitical disruption by seizing the opportunity to reshape their corporate footprints.”

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While the KPMG survey indicates a strong commitment from MNCs to invest in China, there is a lack of consensus on the potential impact of geopolitical tensions on future investments. Some analysts suggest that the current investment climate may not be sustainable if tensions escalate further, while others remain optimistic about the resilience of MNCs in adapting to these challenges.

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As MNCs continue to navigate the complexities of the Chinese market, further developments in regulatory frameworks and geopolitical relations will likely influence investment strategies. The ongoing M&A cycle is expected to evolve, with companies seeking innovative ways to capitalize on emerging opportunities in China.

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