Deep Causes and Strategies for Chinese Companies' Subsidiary Losses in the U.S.

The Deep Reasons Behind Chinese Companies’ Losses in U.S. Subsidiaries and Strategies for Response

In recent years, as globalization continues to deepen, more and more Chinese companies have chosen to go global by establishing branches or subsidiaries in the United States, aiming to expand overseas markets and enhance brand influence. However, many of these firms have encountered unexpected operational difficulties-and even sustained losses-along the way. These setbacks not only affect corporate profitability but also provoke deeper reflection within the industry on the development path of Chinese enterprises in the U.S.

1. Market Differences Between China and the U.S. Lead to Difficult Adaptation

There are significant differences between China and the U.S. in terms of legal systems, business culture, and consumer habits, which often make it difficult for Chinese companies to adapt after setting up operations abroad. The U.S. has a highly developed market economy and strict regulatory mechanisms. Any company must comply with complex tax laws, labor regulations, and industry standards.

For example, in 2025, a well-known Chinese e-commerce company incurred heavy fines after failing to adjust its data privacy policies to meet California’s Consumer Privacy Act CCPA, directly leading to a sharp drop in annual profits. Moreover, American consumers' brand perception and shopping behaviors differ significantly from those in China. Many Chinese companies continue to apply domestic marketing strategies without sufficient localization, resulting in ineffective social media advertising, low conversion rates, and weak sales growth.

2. High Operating Costs Become a Heavy Burden

Establishing a subsidiary in the U.S. means facing much higher operating costs than in China. First, labor costs remain high. With rising minimum wage standards and a robust employee benefits system, this poses a major challenge for companies used to China's lower-cost labor structure. Second, commercial real estate rents are expensive, especially in major cities like New York and San Francisco, making physical store setup prohibitive for many small and medium-sized enterprises.

Additionally, the U.S. tax system is both complex and relatively high. In addition to federal taxes, companies must also pay state and local taxes. According to an industry report published at the end of 2025, the average effective tax rate for Chinese companies in the U.S. was around 35%, significantly higher than the level in China. When combined with compliance consulting and audit fees, financial pressure increases sharply.

3. Strategic Mistakes Exacerbate the Risk of Losses

Some Chinese companies lack thorough market research and strategic planning before entering the U.S. market, opting instead for aggressive expansion and short-term gains. This often leads to resource waste and project failures. Certain firms spend heavily on big events or celebrity endorsements to gain quick brand exposure but fail to provide consistent product support or customer service afterward, causing their brand image to decline rapidly.

Others simply replicate strategies that worked in China without considering the unique characteristics of the U.S. market. For instance, one Chinese smartphone brand succeeded domestically through price competition, but the same strategy failed in the U.S., where it was labeled as low-end and struggled to enter the premium market.

4. Geopolitical Factors Introduce Uncertainty

Although this article aims to avoid sensitive topics, it cannot be denied that recent trade tensions between China and the U.S. have added external pressure on Chinese enterprises. Tariff barriers, technology restrictions, and investment scrutiny have raised entry barriers in certain industries and increased operational challenges. Particularly for tech firms, access to core technologies and cross-border collaboration has become more restricted.

5. Response Strategies Localize, Strengthen Management, and Optimize Layout

To address these issues, Chinese companies should adopt a multi-dimensional approach and develop practical development strategies.

First, enhancing localized operations is critical. Companies should build management teams with international perspectives, deeply understand U.S. market needs and trends, and localize products and services accordingly. Establishing a strong customer service system can improve user experience and brand loyalty.

Second, optimizing cost structures and improving operational efficiency are essential. Intelligent management systems can help reduce labor costs, while flexible work models can cut office expenses. Proper use of tax planning tools can legally and compliantly reduce tax burdens, thereby boosting profitability.

Third, long-term brand building should take precedence over short-term hype. During the early stages of market entry, companies should focus on reputation building and user feedback to gradually establish a solid brand image. Utilizing local media and social platforms for targeted communication can create lasting brand effects.

Finally, companies should carefully assess geopolitical risks and prepare contingency plans in advance. For industries heavily affected by policy changes, diversifying market presence and avoiding overreliance on any single country is advisable.

Conclusion

While Chinese companies face many challenges when developing in the U.S., these are not insurmountable. Only by recognizing the realities, conducting rational analysis, and responding with science-based strategies can they truly establish a foothold in this land of opportunity and achieve sustainable growth.