Above the Noise
Distilling insights and key lessons from new concepts and current events. In this post, one of our founding partners, Vincent Zhuang, explains the emerging opportunities and challenges arising from the shift in Chinese economic priorities
In the past decade, I have had the opportunity to advise the Chinese government, Chinese SOEs, and multinational companies on government policy and strategic topics. China's development has heavily relied on the international market as an export destination and inbound FDI source. Fueled by the economy's continuous expansion and booming middle-income population, Chinese domestic demand has significantly increased in the past two decades. In fact, domestic demand has become the driving force for economic growth for last six consecutive years.
However, China is at a point of inflection. Due to the global pandemic, 2020 has been a challenging year, with most developed countries experiencing near-zero growth. China is facing weak growth and increasing uncertainty in the international market. Global value chain reform will limit China's global expansion. China is also facing a trade war with the US, which puts further strain on its high-tech industry.
To address the change in the geopolitical situation, the Chinese government decided the country should fully embrace its enormous domestic market to cultivate a new development pattern. "Double Development Dynamics" aims to increase domestic consumption and innovation (the internal circulation) while continuously supporting global trade (the external circulation).
We see the Double Development Dynamics paradigm providing opportunities for multinationals in:
International Trade
The focus of "domestic development" will likely boost domestic demand and increase imports from overseas manufacturers. Chinese domestic market growth will likely remain steady for the next few years. The Chinese government promoting fair treatment between domestic and international companies will give international companies more opportunities to compete within the booming Chinese market
International Investment
Attracting international investment remains a primary KPI for regional government. As China's value chain integrates with the international value chain, China's outbound investment will also create international partners' opportunities, as the foreign shareholding percentage in a JV has increased to 51% for some key industries (e.g. insurance, automotive OEM)
The partners at Quantum Logik Consulting have a wealth of knowledge to help global firms understand China and the Chinese market. Ask us how we can help you.
EVENT UPDATE
Vincent will make a keynote speech at Vodafone’s EleVation Digital Days on the April 28th. He will be joined by an impressive lineup of speakers like Mr. Scott Galloway and Mr. Sebastian Thrun, who will gather to discuss innovation topics spanning 5G, IoT and other advancements in the area of digital technologies. #innovation #conference #vodafone