China's Market Access Trap
Why Global Businesses May Be Better Off Staying Out of China
For decades, foreign companies were told that China was too large a market to ignore. To reach Chinese consumers, they were expected to establish local operations, find approved partners, comply with government restrictions, and sometimes modify their products. This made sense for businesses that needed factories, stores, or delivery networks on the ground, but it deserves serious reconsideration for companies whose products can be delivered directly through the internet.
A company does not need to enter China's domestic market simply because Chinese customers want its products.
Consider Meta. Facebook and Instagram are blocked in mainland China, yet Meta reported $18.35 billion in revenue from China-based customers in 2024, largely because Chinese advertisers wanted to reach consumers abroad. Some Chinese businesses can also purchase international advertising through overseas subsidiaries and agencies, meaning their global advertising demand does not necessarily depend on Meta maintaining a local Chinese sales operation.
The contradiction is even more striking when Chinese state media purchase Facebook advertising to reach foreign audiences while ordinary people in China are denied normal access to the same platform. Beijing needs exports to support employment, tax revenue, and foreign currency earnings, while its businesses need international platforms to find customers. The government may control domestic market access, but it does not control the global audience that Chinese exporters need.
Entering China, meanwhile, creates obligations and conflicts that might never have existed otherwise. Google launched a censored Chinese search engine in 2006, only to abandon that censorship arrangement in 2010 after years of controversy. Blizzard's Chinese operations brought local approval requirements, altered game content, and disputes between domestic operators. When The9 lost its World of Warcraft license in 2009, it reported its successor, NetEase, to Chinese regulators, demonstrating how a local business partner could turn government oversight into a commercial weapon.
Consumers do not necessarily benefit from these arrangements. Chinese players seeking newer World of Warcraft content migrated to Taiwanese servers, while marketplaces later restricted sales of overseas game cards under Chinese regulations. Nintendo's officially licensed mainland Switch offered a more limited ecosystem than the international version, and its Chinese eShop eventually ended sales and downloads in 2026. A company may enter China hoping to improve access, only to give consumers a more restricted product and inherit the blame when that product disappoints.
The alternative is not to abandon Chinese customers, but to let them choose the global product without building a separate Chinese operation. Strong brands, original intellectual property, and established social networks give consumers reasons to seek out products that local competitors cannot easily replace. Chinese players have imported overseas consoles, joined international game servers, and purchased software through global channels because they wanted those particular products rather than locally approved substitutes.
Something else happens when people make that choice. After Instagram was blocked in China in 2014, researchers found that more than half of its previously active users continued using it, and some learned new ways to access other international websites. People may begin by looking for a game, a social network, or a useful service, but the skills they acquire can give them access to much more of the world. A sufficiently valuable product can encourage users to develop the means to reach it, even when their government would prefer otherwise.
The financial calculation also needs to change. A company should not compare the revenue earned by its Chinese subsidiary with zero, because some of those customers might have purchased its global product anyway. The proper comparison is between two possible histories: one in which the company enters China and accepts the costs of local operations, and another in which it stays abroad and attracts Chinese customers directly. Regulatory compliance, local partners, product compromises, reputational damage, and eventual withdrawal all belong in that calculation, even when their costs are difficult to measure.
There is no perfect historical experiment that can tell us which path would have earned more money. But that uncertainty is precisely why entering China should no longer be treated as the obvious choice, especially for digital businesses with valuable products and no need for local physical operations.
For such companies, staying outside China may preserve more profit, more freedom, and a better product for the Chinese customers who choose to use it.
A government can refuse a company permission to operate locally, but that does not mean the company must surrender its independence to reach people who already want what it has created.