As geopolitical pressures, shifting cost structures, and evolving consumer demands reshape the global business landscape, companies are revisiting their China strategies. We sat down with Xi Zhang, Partner at Alarar Capital Group and Head of our Management Consulting division, to discuss China’s changing role in global supply chains, the rise of domestic competitors, and how businesses can build agile, resilient strategies for the decade ahead.
Xi Zhang brings a uniquely cross-cultural perspective to Alarar Capital Group’s consulting practice. Having lived almost 20 years in Europe, , his career has spanned global management consulting and hands-on advisory for clients navigating the complexities of Asia-Europe business. He started his consulting career at McKinsey & Company in Stockholm and later spent eight years as a Managing Director and Partner at BCG in Shanghai, working across both the Nordic and Chinese markets.
Driven by curiosity, a desire to create lasting impact, and a passion for bridging East and West, Zhang has built a career advising clients across industries on strategy, operations, and transformation. Today, he leads Alarar Capital Group’s management consulting division, one of four business areas along with Capital Markets, M&A, and Asset Management. He was drawn to Alarar Capital Group by what he describes as a shared focus on delivering client value and a unique Nordic-Asian positioning. “I saw the energy here,” he says. “Alarar Capital Group is committed to cross-border value creation, and I wanted to be a part of that.”
Zhang observes that while many Western companies initially entered China with a technological or branding advantage, sustaining that edge over time has become more difficult.
“China’s local players are fast, pragmatic, and increasingly innovative,” he notes. “Many Western companies underestimate the pace of iteration here. In automotive, for instance, product development cycles in Europe might span 45 to 55 months. In China, it’s closer to 18.”
To compete sustainably, he outlines three imperatives: localization, speed, and brand protection.
“The premium brand is one of Europe’s biggest assets in China. Once it’s diluted, it’s very hard to recover,” Zhang warns.
Many global companies are reevaluating their approach to China. According to Xi Zhang, this shift is being driven by several underlying trends.
“China’s overall GDP growth is slowing down, demographics are changing rapidly with a rising elderly population, and we’re seeing stronger nationalist sentiment affecting consumer preferences,” he explains. “At the same time, household debt is increasing, and people’s disposable income has tightened over the past decade.”
On the industrial side, overcapacity in production has become a concern. “All of these structural challenges are pushing companies to reconsider how they engage with China,” says Zhang.
He encourages companies to think about China from three distinct angles:
“Not every company needs to retreat entirely,” Zhang clarifies. “Some are simply narrowing their focus to more profitable niches, instead of competing in low-margin or highly saturated segments.”
Other companies are making selective exits from China in one area—such as sales—while continuing to manufacture or source from the country to serve other global markets. “You can scale back in one dimension without retreating in all three,” he says.
At the same time, some businesses are choosing to double down. “For example, certain chemical companies are still investing in large production facilities in China, using it as a base to serve the global market and tapping into local capabilities and technology.”
In Zhang’s view, it comes down to a company’s individual circumstances. “What’s your exposure to China? What role does it play in your strategy? Where do you see your future growth coming from? These are strategic decisions, and there’s no one-size-fits-all answer.”
The concept of “China Plus One,” aimed at diversifying supply chains beyond China, is no longer just a theoretical framework. Yet as Xi Zhang points out, the rationale for relocating operations remains complex and highly contextual.
“Very few companies move purely for cost reasons,” he explains. “China still offers unmatched scale and efficiency. Unless the decision is based on geopolitical risk or the need for strategic flexibility, the business case often doesn’t hold.”
Rather than opting for a full relocation, Zhang encourages companies to develop a well-informed contingency plan. This involves evaluating alternative sourcing markets & partners, understanding ramp-up timelines, and creating flexibility—without prematurely shifting core operations. “Don’t plan and execute for the worst scenario”, added Zhang.
Southeast Asia, particularly Vietnam, continues to draw attention for its geographic proximity to China, favorable labor conditions, and strong government support for industrial development. Mexico is a strategic option for companies serving the North American market, while Eastern Europe is becoming an increasingly relevant choice. Even the United States is emerging as a viable destination as industrial policy gains momentum.
A noteworthy trend, Zhang adds, is the international expansion of Chinese suppliers themselves. “More companies are physically relocating to countries such as Vietnam, Mexico, or others, while continuing to work with the same suppliers. This hybrid model combines the benefits of scale and familiarity with a more diversified risk profile.”
Despite the current decoupling narrative, Zhang believes the long-term outlook for China remains strong—albeit different.
“China will continue to evolve—from a low-cost manufacturing base to a global innovation center,” he says. Domestic consumption, rising quality standards, and industrial upgrading will drive this transformation.
Trade tensions, he argues, may in fact catalyze China’s next chapter.
“Decoupling forces local firms to innovate, upgrade, and move up the value chain. It’s a painful process, but ultimately a productive one—for both China and the broader global economy.”
As large multinational companies recalibrate their China strategies, Zhang believes this may open the door for smaller players.
“When big players adjust their product lines or pull back from certain segments, they leave gaps in the market,” he explains. “That creates an opportunity for European SMEs to step in, especially in niche categories where they can compete on quality, specialization, or agility.”
He adds that many smaller companies sourcing from China have actually increased their procurement volumes in recent quarters, suggesting growing engagement despite broader uncertainty. Slower inflation and more available production capacity may also give SMEs the breathing room they need to re-invest and grow.
Zhang encourages these firms to think flexibly about how they operate in China. “In today’s climate, a joint venture or licensing model might make more sense than a fully owned foreign entity,” he says. “It allows them to remain competitive without overextending themselves.”
In this shifting landscape, Zhang sees Alarar Capital Group’s management consulting division as uniquely positioned.
“We’re global and local,” he says. “Our teams combine on-the-ground experience in China and Southeast Asia with deep understanding of European and U.S. business practices.”
Alarar Capital Group helps companies not just design strategies but implement them, offering operational support across market entry, supply chain restructuring, and M&A. With two operation centers in China and Vietnam, the firm supports execution on both sides of the shift. In Zhang’s words:
“Clients don’t just need advice. They need results. We’re able to guide the strategic direction and then roll up our sleeves to make it happen.”
— Xi Zhang, Partner, Alarar Capital Group
Alarar Capital Group’s management consulting division is a trusted partner for organizations seeking to navigate the evolving China landscape and build resilient, future-ready operations. Combining strategic insight with hands-on execution, we help clients diversify sourcing models, optimize cross-border performance, and unlock sustainable growth. With deep regional expertise and a proven track record, we deliver integrated solutions that bridge markets, align cultures, and create measurable impact in a complex global environment.
Author:
Xi Zhang
Partner, Alarar Capital Group
Author:
Anna Sahlberg Carlsson
Marketing Manager
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