How will the Chinese Market affect your Business?

The Chinese market is constantly evolving and is projected to continue to expand over the course of the next 30 years. Exponential population growth has led to increasing consumerism, and production. Whether you are exporting or importing, our Business Diagnostics Framework stresses the importance of understanding market forces and asks “How will this affect my business?”.

Key Insights into China 2018

I recently returned from another enjoyable teaching trip to Beijing, despite the 45° C weather! I led a group of senior bankers in Beijing through our Business Diagnostics Framework in a workshop filled with practical advice on how to size up a company.

One evening over dinner, I had the opportunity to catch up on some of the latest Chinese economic developments in conversation with David Hsieh, a frequent commentator on Chinese growth trends. Below is a synopsis of what I learned.

Current Chinese Market Report 

Key takeaways on the current Chinese market that business owners should consider;

• China – By the Numbers

  • Total output-per-person – Per capita Gross Domestic Product (GDP) is currently $60K per person in the USA, $45K per person in Canada and $9K person in China. China is forecast to have equalized total output-per-person by 2050.
  • Country debt-to-GDP – The USA has 107% country debt-to-GDP versus China which is at 44%. For comparison, Canada has country debt-to-GDP of 97% while Italy is at 132%.
  • More consumers, more debt  –  The Chinese middle class is estimated to be more than 550 million by 2022. Household debt-to-GDP in China has risen to 50% versus 78% in the USA and the younger generation of Chinese have increased levels of consumer spending.

• Chinese Coffee Culture

  • Starbucks has grown from 3,000 to 6,000 outlets and is exploring a potential supply chain alliance with Jack Mah of Alibaba. Interestingly, Tim Horton’s (now majority-owned by the Brazilian investment firm, 3G Capital) also want to open 1500 outlets in China over the next decade.  Watch for an upstart new entrant, Luckin, already with 660 outlets in China, and supported by a Singaporean wealth fund.

• Hainan Free Trade Zone

  •  The new free trade zone (FTZ) being developed in Hainan, South China (an island the same size as Taiwan), will be the largest FTZ in China by 2022, perhaps rivaling Hong Kong or Dubai.

• Take a Flight

  • The latest Airbus orders (186 of the A320 and A350 models) from China beat out Boeing at the recent Farnborough, UK air show. Boeing is forecasting China’s domestic airplane market to surpass the U.S. market by 2030.

• New Beijing Airport

  • Daxing – The world’s largest airport is slated for completion by 2019 to meet demand for the 2022 Winter Olympics. The $13 billion price tag will support 100 million passengers per year by 2025. That’s right, 100 million!

• Demand for LNG

  • Despite major players Qatar and Australia having significant lead times, China has huge pent up demand for liquid natural gas, targeting to take 35% of all global supply. Possibly an opportunity for Western Canada? 

• North American vs Asian Tech spat?

  • The continued battle between the largest technology conglomerates in the USA and China (captured by the following acronyms – FAANGs; Facebook, Apple, Amazon, Netflix and Google versus BATS; Baidu, AliBaba, and Tencent), continues to heat up. With Facebook, Google, YouTube and Netflix banned or severely restricted in China, domestic lookalikes have grown rapidly. 

• Supply Chain Efficiency: One Belt, One Road (OBOR)

  • Since its inception a few years ago, over 9000 trains transporting goods have traveled directly from major Chinese cities to over 40 EU cities.

• Cash-less Society

  • Of particular note is the trend in China towards a cash-less society with integrated social platforms AliPay and WeChat Pay carving out dominant market positions.

Taking all these modern Chinese market insights into mind, how do these trends and innovations affect your business?

Looking forward to hearing from you,

Mike Thompson

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Mike Thompson is a Fellow, Certified Management Consultants (FCMC), Associate Faculty at Royal Roads University and co-author of Business Diagnostics, a business book providing a simple methodology to size up a business.