January 2024 Quarterly Insights

Recent Trends in Global China Business Restructuring


2 min read
Recent Trends in Global China Business Restructuring

There is a burgeoning trend of multinational corporations (“MNC”) actively restructuring their China businesses through any number of divestitures and / or carve-outs to realign their balance sheets and maximize shareholder value.

It’s a departure from the start of the new millennium through 2018, when one of the fundamental pillars of every good corporate business plan was growing exposure to China. In accordance with predictions that the 21st century belonged to China, this massive, homogenous market of over one billion people was opening up, gentrifying rapidly, and presenting almost limitless potential to global corporates. It seemed that every Fortune 500 CEO was constantly thinking about how to capitalize on and secure their company’s share of the China dream. 

Fast forward to 2023, and China now finds itself often at odds with former western trade partners resulting in an entirely different state of play:

The result is that every MNC board of directors is now focused on its “China Plan B” strategy. Board members are asking themselves what the best way is to handle an onshore China business that, for multiple reasons, has failed to live up to expectations and faces severe headwinds for the foreseeable future.  It’s led to a wave of restructuring, including:

  • In 2012, a joint venture between Guangzhou Automobile Group Co., Ltd. (“GAC”), Mitsubishi Motors and Mitsubishi Corporation (“Mitsubishi”), was established and started its operations as the company responsible for production and sales of Mitsubishi Motors products in China.
    • The ownership breakdown: GAC (50%), Mitsubishi Motors (30%) and Mitsubishi (20%).
    • On September 27, 2023, it was reported that Mitsubishi had decided to withdraw from automobile production in China and exit the JV with GAC. GAC will take full control of the joint venture and convert the plant to produce EVs.
  • Cargill, one of the top poultry producers in the U.S., has operated in China for more than 50 years in the field of food and agricultural products.
  • In 2011, privately-owned Cargill started its China poultry business, including breeding, raising, and processing chickens in Chuzhou in eastern Anhui province.  In 2019, Cargill announced the opening of an additional $48.8 million poultry plant in Chuzhou to address the growing demand for poultry in the country.
  • Recent factors such as the Ukraine-Russia war and COVID-19 have greatly compressed the margins of livestock farms in China.
  • In May 2023, Cargill announced it agreed to sell its China poultry business unit, Cargill Protein China, to the Greater China-focused private equity firm DCP Capital.

Most MNCs still believe in the long-term potential of China’s marketplace and many have chosen to retain a minority stake in the original business, enabling them a “second bite at the apple,” assuming the business thrives under its new owner. Many MNCs also don’t characterize these restructurings as “exits” from China, instead describing them as strategic decisions to structure the business in a way that is more flexible and adaptable to the fast-changing dynamics of the China market. Regardless of which route or structure the MNC decides, the engagement of a financial advisor deeply familiar with the MNC’s business, the local competitors in China and the local Greater China-focused PE network, can provide a company with the insight required to make the most well-informed decision to meet their strategic needs.