strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: March 22, 2010

 
 

Getting China Right

S+B: Do you see China’s population becoming a more sophisticated consumer market?
TSE:
Yes. Historically, China has been a largely rural society. But the government has decided that China should urbanize itself to a large extent. We will see a fundamental change in the nature of Chinese consumers: in the number of people who can afford consumer products, and the way that they think about buying products and services. No longer are they just one large army of people with similar clothing styles. This provides major opportunities, still untapped, for global companies that are interested in the Chinese market.

It’s imperative that multinational corporations understand the potential and complexity of China’s markets — in particular the extraordinary growth trajectories of the country’s regional markets. Only then can they develop the distribution networks and understanding of consumer culture that they will need to target their efforts.

S+B: Some observers, such as Paul Krugman, argue that the Chinese government is actually mercantilist: It’s trying to move in directions that benefit its own economy at the expense of the rest of the world.
TSE:
I do not see China as a threat to global companies. On some issues, Chinese officials may have a different point of view than their counterparts in other countries. I think that’s only natural. But over the long term, as I said, I expect there to be even more integration between China and the rest of the world, because China can become a stronger global power only by becoming ever more integrated into the global economy.

S+B: How are China’s government-sponsored business initiatives shaping the competitive landscape? For instance, should Boeing and Airbus feel threatened by Chinese competition?
TSE:
Threatened is the wrong word — but certainly, just as in a host of other industries, China is building the capacity to have its own globally competitive aerospace industry. And I expect that the duopoly of the last two decades will become a three-way competition, and probably far quicker than most of us expect: say, in the 2020s.

S+B: What do you make of Google’s threat to pull out of China if the government doesn’t stop requiring that it censor the findings on the Chinese version of its website?
TSE:
There are industries in China where foreign companies will find it hard to succeed against local businesses with local knowledge, particularly in politically sensitive areas, such as the media and the Internet. Yahoo and eBay both failed to find success in China. And Google has struggled to take market share from the country’s leading search site, Baidu. In my view, part of this story is that Google has decided to concentrate its efforts elsewhere.

S+B: Is China’s mix of top-down government involvement and bottom-up entrepreneurialism unique in history? Or have we seen it elsewhere?
TSE:
I think it’s driven by China’s unique history. Before the Communists took over in 1949, the Chinese, frankly, had been fairly disorganized for many years.

At the same time, the Chinese have always been known as good entrepreneurs, and particularly good small-business people. This has been in the blood of the Chinese for who knows how long. In an article I wrote several years ago, called “China’s Five Surprises” [s+b, Winter 2005], I noted the “Why not me?” attitude. Meaning that, in all corners of China, there will be people asking, “If Li Ka-shing [the chairman of Cheung Kong Holdings] can be so wealthy, if Bill Gates or Warren Buffett can be so successful, why not me?” This cuts across China’s demographic profiles: from people in big cities to people in smaller cities or rural areas, from older to younger people. There is a huge dynamism among them.

 
 
 
 
Close
Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.

Close