Your business opportunity for growth?
Much of the debate at the World Economic Forum (Davos) last month focused on how multinationals should rebuild their growth strategies in response to the varying economic dynamics and rates of development experienced across the globe. Investors fear the Chinese gold rush is over – as highlighted by The Economist’s recent cover story, ‘China loses its allure’.
There is no doubt that for global companies, making China work is not easy. The Economist points to a range of issues, not least rising costs. Companies such as Best Buy and Yahoo are leaving, and others, like IBM, face declining revenues and the economy is slowing, having reached 7.7% last year.
The run-away growth rates of the last 30 years, instigated by Deng Xiaoping’s reforms, may become consigned to the history books but China is entering a new, arguably more sustainable, phase of growth. In China services are now bigger than manufacturing; middle class wealth and expenditure is growing; and the government’s revolutionary Third Plenum outlined last November set the stage for a slew of economic reforms that will provide incredible business opportunities for western multinationals to sell their ‘know-how’. By the end of 2013, China had eclipsed Japan to become the world’s second largest economy – bigger than France, Germany and Italy combined.
China is looking west more than ever before. Outbound growth is on the rise, along with the demand for western education. According to the Huron Report, published during Davos week, Britain is now the favoured country for the secondary education of wealthy Chinese, with the US in second position. The implications are that, in time, we could see a significant increase in Chinese executives with strategic positions in western organisations.
China is a long-term game. It’s more complex and tougher than before but optimism about the country should not be waning and the allure should not be lost.
Is your business ‘China ready’?
Adapted from observations by Jean Stephens, CEO RSM International, at the Davos World Economic Forum in January 2014