Shoppers walk past a shopping mall in Beijing, China, Nov. 23, 2023. AP-Yonhap

Apple, Tesla and Starbucks are among the most recognised U.S. brands in China. Their presence not only represents business success stories, but also the broad goodwill that has existed between the two countries over the years. When people think about U.S.-China mutual interdependence, a typical example could be an affluent Beijing or Shanghai consumer driving a Tesla vehicle, holding a Starbucks cup, and swiping on an iPhone.

The chief executives of these companies have become goodwill ambassadors. Tesla founder Elon Musk had the privilege of entering the Zhongnanhai compound, the heavily guarded working and residential area for top Chinese leaders, on almost every one of his China visits in recent years. Apple CEO Tim Cook is the head of an international advisory body for a school at the prestigious Tsinghua University, which provides direct access to Chinese state leaders on a regular basis. In 2021, Chinese President Xi Jinping wrote to Howard Schultz, the chairman emeritus of Starbucks, encouraging his company to play a positive role in advancing economic and trade ties between the two countries.

The cosy relationships, however, may see challenges during the second presidential term of Donald Trump due to changing market conditions and the deteriorating state of U.S.-China ties. First of all, the Chinese market has become harder to crack for these brands. Starbucks, after years of expansion in China, is finding that its high-priced lattes and esoteric brews are increasingly out of step with changing consumption patterns. It is seeking a "strategic partnership", a term that implies it is looking for a buyer for its China operations. In one scenario, Starbucks could become a pure franchise like McDonald's and Coca-Cola in China — the brand is still a U.S. one but the mainland business is run by Chinese companies.

Elon Musk during the opening ceremony for Tesla's China-made Model Y programme in Shanghai, Jan.7, 2020. Reuters-Yonhap

Apple's iPhone, the only visible foreign smartphone brand in China, is facing fierce competition from local brands from Huawei Technologies to Xiaomi. No one in China would be crazy enough to trade a kidney for an iPhone as a teenager did in 2011. Tesla is facing similarly fierce competition in the electric vehicle sector where local brands are catching up in design and production capabilities.

Secondly, the fragmentation of data management systems may result in higher costs for U.S. brands in China. The Great Firewall has always been an obstacle for foreign internet firms such as Google and Facebook. Mark Zuckerberg's well-documented and failed attempts to bring his social media services to China were a clear signal that Beijing was not willing to compromise cybersecurity to entertain U.S. business plans.

In the era of artificial intelligence and big data, however, almost every cross-border business will face the same challenges. Apple is still waiting for Beijing's approval to bring Apple Intelligence to mainland iPhone users, even though Cook has made three visits to China this year, while Tesla is pending Chinese approval for its full self-driving technology.

Apple CEO Tim Cook, center, attends the China Development Forum in Beijing, March 24. AFP-Yonhap

The two companies are likely to eventually receive the greenlight. Apple and Tesla are also expected to comply with strict data localisation and protection rules, just as ByteDance's TikTok had to comply with equally strict data regulations in the U.S..

Another challenge for these U.S. executives will be a potential political backlash at home, given that the climate in Washington is such that even normal business engagement with China is subject to heightened scrutiny. A U.S. lawmaker has already warned that Musk's ties with Beijing could be exploited, posing a national security risk, a far-fetched allegation that would be hard to imagine only a few years earlier.

As strategic rivalry between China and the U.S. intensifies, many U.S. corporations — once considered role models for business success in China — have had to cut their China exposure. It is a destabilising development since business ties have been seen as the "ballast stone" to stabilise the ship of U.S.-China relations. In this regard, the continued success of Apple, Tesla and Starbucks in China is important not only for the companies but also for the broader bilateral relationship.

Read the full story at SCMP.