Despite unproductive trade talks in Washington, China's market is proving an irresistible magnet for American companies looking to grow.
For many of these companies, the wheels to expand in China have been in motion for some time, but recent trade tension and uncertainty have not dissuaded them, so far.
Starbucks along with Yum! Brand, Inc. (YUM) , Nike (NKE) and Tapestry Inc (TPR) , the umbrella brand for Coach and Kate Spade, are all looking to developing markets to provide growth on the international level, says Brian Yarbrough, an analyst for Edward Jones, in an interview with Real Money.
Yum! China plans to more than double its number of Kentucky Fried Chicken and Pizza Hut restaurants.
"For most consumer discretionary companies, there are not a lot of growth opportunities domestically," says Yarbrough, noting "trade concerns have of course thrown a little bit of cold water on China's market right now."
Still, the alluring combination of demographics and projected growth is too strong to ignore for many of U.S. brands.
Starbucks' Partnership with Alibaba
Last week, Alibaba Group Holding Ltd (BABA) , China's Internet giant, shared more details about its partnership with Starbucks Corporation (SBUX) , the American coffee retailer, as both angle to take advantage of China's fast-growing middle class.
Alibaba CEO said its American partner plans to "transform Starbucks China into a digital operation."
For Starbucks, China represents its most digitally advanced, profitable stores in the world.
Starbucks has a 58.6% share of the market in China, according to Euromonitor data, and is opening a store there every 15 hours.
"Starbucks' newest class of stores in China are delivering the highest average unit volumes, return on investment and profitability of any of the market's prior store classes in its history," according to the company.
And China's middle class is projected to keep growing and to keep spending.
China's middle class could spend $3 trillion more by 2022, one of the fastest-growing n the world, according to a study by Brookings Institution on the global middle class.
With Starbucks' growth slowing in the U.S., China simply presents too good of an opportunity to pass on.
Over the next five years, the Starbucks ready-to-drink business in China is expected to expand to more than 400 major Chinese cities.
Waymo, Alphabet's (GOOG) driverless car unit opened a China subsidiary in Shanghai back in May, according to a filing to China's National Enterprise Credit Information Publicity System. Chinese news site Guancha first reported the news, also saying the company may bring self-driving taxi service to China by the end of 2018, in addition to designing and testing autonomous vehicle parts in China.
Before that, Alphabet launched AI research lab in Beijing last year. The company also launched an AI-powered game called 'Caihua Xiaoge', in which the user draws and the AI guesses what it is. The game became a hit.
And most recently, Alphabet is also planning to relaunch a friendly version of Google search engine, which is code-named Dragonfly and is facing criticism from Google employees.
Slow Trade Talks
Not much has come out of the talks in Washington, with new series of tariffs looming on the horizon.
Meanwhile, the Chinese government has taken a proactive approach to supporting the yuan. This month the banks resumed adjustment of the yuan pricing against the dollar to ward off devaluation.
"If the guidance is not heeded by the market, there might be follow-up policy actions to imprint the guidance on the market," said Goldman Sachs in a research note on Saturday.
How long can the Chinese government prop up the yuan against the dollar and avoid further devaluation and outflow of capital?
China's retaliation against U.S. tariffs is another risk that all U.S. companies operating in China face.
As Duncan Clark points out in his book Alibaba: The House That Jack Ma Built, the last time China suffered a major economic crisis in 2008, it actually worked out well for companies like Alibaba, with a major market share.
"China's traditional export markets were thrown into a tailspin," he wrote. "Taobao pried open the factory gates to consumers in China instead."
Together with Tmall, e-commerce site Taobao makes up 86% of Alibaba's total revenue.
The U.S. companies are counting that the Chinese government will do whatever it takes to keep the economy churning along and its fast-growing consumer base happy.
In 2008, the Chinese government policies ended up boosting e-commerce companies like Alibaba.
"It became clear that the much-needed rebalancing of the Chinese economy toward consumption could no longer be postponed," Clark wrote. "And Alibaba is one of the biggest beneficiaries."
- Martin Cassidy contributed to this article.