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Quick-moving domestic athletic brands are now able to match American quality and cachet in the hypercompetitive and increasingly nationalistic market

Nearly a half-century ago, Nike co-founder Phil Knight traveled through China on slow train, with passengers stripped to their underwear in the summer heat, and dreamed of selling sneakers.

He laid out an ambitious vision—“One billion people, two billion feet”—that called for an aggressive push into the country. By 2010, China was among Nike’s most lucrative markets, offering a blueprint for U.S. companies seeking to cash in on China’s rise.

Today, Nike’s China business is flailing—a cautionary tale of an American giant caught in the tar pit of China’s hypercompetitive and increasingly nationalistic consumer market.

Nike’s China revenue over the past three quarters was 28% lower than in the same period five years ago, even as the country’s sportswear market boomed. Nike has dumped its longtime China leadership, jettisoned other top employees and acknowledged “structural” challenges in the country, which is now the worst-performing part of its global operations.

Executives recently told investors that revenue in China and Taiwan could fall by about 20% year-over-year in the quarter ending May 31—a forecast that pushed Nike’s stock price to its lowest levels in more than a decade. The company subsequently said it would reduce its workforce by some 1,400 workers, or about 2%.

Nike is just one of many U.S. brands ailing in China. Weakness in China’s economy has weighed on spending, and many shoppers are losing interest in American products as tensions between the two countries rise. Many U.S. companies are struggling to compete in a country once considered essential to their futures.

Starbucks, credited with spreading coffee culture in China, sold a majority stake in its China operations in April, after years of tough competition from local coffee vendor Luckin. American automobile brands have been hammered by Chinese electric-vehicle companies. California clothing-brand Guess, which once had more than 150 stores in China, closed all its stores in March as it plots a new course in the country.

Former employees said in interviews that many of Nike’s issues boiled down to a central problem: It was too slow to recognize that China’s competitive landscape had changed, with the rise of quick-moving domestic brands increasingly able to match American quality and brand cachet. U.S. products just aren’t as cool anymore.

Chinese brands such as Anta and Li-Ning have been offering high-end running shoes and other gear at lower prices, with fast product development cycles. Anta collaborated with Chinese scientists to develop a type of foam cushion made with nitrogen that provides extra bounciness—all but demolishing Nike’s competitive moat.

Reviewers who conducted side-by-side performance tests placed a top Li-Ning running shoe, the Elite, on par with Nike’s high-end Vaporfly. NBA stars such as Kyrie Irving and Klay Thompson wear Anta on the court, and top East African runners have taken the podiums in them.

Nike has been promoting a “China-for-China” initiative to get back in the game. It said it is working hard to revive the China business, including writing off unsold inventory and revamping stores. Executives said in March that foot traffic and comparable sales were improving as a result, with sales of running products growing in the double digits in the recent quarter.

“What we’ve done is a start, but it’s not happening at the level or pace we need to drive wider change,” Nike Chief Executive Elliott Hill told investors in December.

Some former employees, though, said the company has struggled to come up with memorable products for the China market. One basketball shoe called the S.T. Flare, designed for the nation’s concrete outdoor courts, was widely viewed as solid. But some Chinese reviewers said it was too expensive at $130, with many equally good Chinese models available for less.

Nike also kept pushing the Jordan brand, which includes Air Jordan shoes, even though it didn’t resonate with younger Chinese, many of them born after Michael Jordan retired. One former Nike employee in China said his cousin there was surprised to learn that Jordan was still alive.

Nike’s designs nowadays feel “flat,” said Zong Haolin, a 27-year-old basketball enthusiast in Shanghai. He spent his teenage years saving up to buy Nikes, but in college fell in love with Li-Ning’s “Way of Wade” shoes, endorsed by former NBA star Dwyane Wade. “Domestic Chinese brands naturally stepped in to fill the void,” he said.

Nike has more China-specific products on the way. It just released a black ballet flat with floral detailing, called Shox Z Calistra. It was created in collaboration with a trendy Chinese fashion incubator called Labelhood.

“Over the years, we established our premium position and market share there because the Chinese consumer believes in our ability to innovate and inspire them through sport,” said Hill, the CEO, in December. “I’m confident we’ll get back to fulfilling that promise.”

Nike is also trying to rebound in the U.S., where big bets on athleisure and streetwear during the pandemic left it vulnerable to upstarts such as On and Hoka. Hill, who took over in October 2024, has pledged to focus on innovation over athleisure, an effort that is starting to gain traction in the U.S. with improved sales there.

In China, according to former employees and analysts who track that market, Nike was slow to adopt some locally popular sales tactics, and it didn’t set up a flagship store on Douyin, China’s version of TikTok, until 2024, a couple of years later than Chinese rivals. A Nike spokeswoman said Douyin is an important platform for the company.

Matching domestic producers on price has been difficult. Many of Nike’s shoes are now made elsewhere and imported into China, adding costs, though a Nike spokeswoman said that “China-for-China manufacturing remains a core and growing strategy.”

Its top running shoes, including the Alphafly, are too expensive for ordinary Chinese customers, so the company at times pushed more basic offerings such as the Winflo, a low-cost alternative with fewer premium features. It struggled to compete with top-quality Chinese-branded sneakers that sold at similar price points, said current and former employees.

Before its recent stumbles, Nike’s expansion in China was seen as a master class in how to sell an American product in the world’s second-largest economy. It signed up popular Chinese athletes as sponsors, designed China-specific products and capitalized on the brand’s reputation as a premium shoe that couldn’t easily be matched.

In 2019, Nike reported its 20th consecutive quarter of double-digit growth in China, and brought in billions of dollars in earnings from the country.

Trouble hit in 2021, during the Covid-19 pandemic. Chinese online nationalists went after Nike for saying it wouldn’t source products from Xinjiang, a remote western province where human-rights groups allege forced labor is rife. People posted videos of themselves burning Nikes, and celebrities cut ties with the brand, including mega pop star Wang Yibo, who signed with Anta the next month.

Nike’s then-CEO, John Donahoe, tried to calm the waters, evoking the company’s long history in China. Although some Chinese athletes stuck with the brand, sales slumped.

With the pandemic limiting travel into China for three years, executives at Nike headquarters in Beaverton, Ore., increasingly relied on reports from Angela Dong, the company’s longtime China general manager. Dong typically painted a rosy picture, which was relayed to the top via Chief Commercial Officer Craig Williams, according to two people familiar with the situation. Williams declined to comment, and Dong didn’t respond to requests for comment. Both have since left Nike.

The reality was that China was undergoing a major shift toward more exercise and healthy lifestyle activities, not long after Nike had changed its sales approach.

By 2021, Nike had reorganized its China team so that many employees no longer specialized in individual sports, instead focusing on broad categories such as men, women and children. It was part of a global restructuring, since reversed, that is widely seen to have taken Nike away from its focus on delivering highly competitive sports offerings.

It didn’t help that Chinese young people were moving beyond a decadeslong fascination with basketball and the NBA, a traditional Nike strength, toward newer sports such as yoga and hiking, where the brand was less established.

Anta, one of Nike’s chief competitors in China, was determined to serve those niches. It formed joint ventures with international franchises that had strong positions in individual sports, such as Japanese ski apparel brand Descente. It also became the largest shareholder in Amer Sports, which owns premium brands such as Arc’teryx, known for outdoor apparel, and Wilson, for tennis gear.

Anta Chairman Ding Shizhong boasted in a 2024 speech that he now had 15 brands to meet consumers’ different needs. He didn’t want to become the “Nike of China,” he said, but the “Anta of the world.”

Meeting young Chinese people’s diverse interests is “the new game that all the brands are playing, and I would say Anta is actually playing that really, really well,” said Wei Kan, who worked in marketing for Nike and Nike-owned Converse for 14 years until 2024, and now runs an independent consulting firm.

A Nike spokeswoman said that more diverse interests in China plays to Nike’s strengths as a company that innovates across sporting categories.

In early 2024, upticks in China sales had Nike’s then-CEO Donahoe suggesting to investors that the worst had passed.

A few months later, though, the brand stumbled again, when an ad timed for that year’s Paris Olympics featured an Asian female ping-pong player licking her paddle. Some viewers saw it as a gesture that insulted Chinese athletes. The incident was heavily covered by state media at a time when Chinese nationalism was on the rise.

The company pushed a more assertive “China-for-China” strategy, and announced that its first “Icon” studio for advertising and content creation outside of the U.S. would be built in Shanghai.

Former Nike employees said in interviews that they didn’t notice any serious acceleration in new product development, and that design decisions still largely came through the U.S. headquarters. A Nike spokeswoman disputed that, saying Nike established a Sport Research Lab in Shanghai to ensure product innovation is tailored to Chinese consumers.

Former employees said Chinese rivals were adopting more punishing work schedules to help push products out more quickly. A former Nike manager in China complained that staffers could sometimes be hard to locate in person because of the company’s hybrid work policies, which were dialed back in 2024.

A persistent challenge has been Chinese consumers’ increasing tendency to embrace local designs rather than foreign products, a trend of cultural pride known as guochao.

Archrival Adidas, which experienced its own Xinjiang-related problems in 2021, released viral hits in China, such as a “Tang” jacket that integrated the brand’s classic striped pattern with traditional Chinese tailoring. Other Western brands such as apparel company Lululemon and On thrived with identities built on yoga and running, respectively.

After Hill took over as CEO, Williams, the chief commercial officer, left Nike, and in March, Dong, the general manager in China, was replaced by Cathy Sparks, who had previously led Nike’s Asia business outside of China. Hill changed the company’s org chart so that Nike’s regional heads report directly to him.

Some former employees said there is a path for Nike to reclaim its appeal in China if it releases more competitive products targeted at niche audiences. They cited some recent successes, including a Nike Chinese New Year advertising campaign, developed by a local creative agency, that showed family members using sports to bypass tough discussions about money and career that happen during holiday gatherings.

Others worry that overcoming the new competition from niche brands and waning interest in U.S. names will continue to be an enormous challenge.

Nike “needs the China business, but the Chinese business is completely the opposite of what it was,” said analyst Laurent Vasilescu, who tracks Nike for BNP Paribas. “There is no China engine anymore to drive the growth.”

Hill insists the company won’t give up on China. “It will take time,” he said in March, “but we remain confident that serving 1.4 billion potential athletes in China is one of the most powerful opportunities in sport.”