China’s Economy: From Exports to Domestic Consumption

Abstract

The Chinese economy is reaching a turning point. Exports are flattening and the economy is no longer expected to grow at the double-digit rates of the past. China can no longer afford to continue to be the world’s leading exporter of low-tech industrial products; it is reaching the limits of growth as its citizens choke in smog-ridden cities, clean water is in ever-decreasing supply and its population transitions into an inverse pyramid age structure.

The year 2016 will see the beginning of a transition. Change will not happen overnight, argues Wikistrat’s Hugh Stephens in this report. The Chinese ship of state is like a large ocean liner. But slowly but surely, the bow is turning and it is becoming evident to all concerned which way the ship is moving.

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Bottom-Line Recommendations

  • Companies planning to enter or already engaged in the Chinese market should follow closely the final directives of the 13th Five Year Plan when it is officially adopted in March 2016.
  • Marketing plans for products and services should be adapted accordingly, bearing in mind that the Plan will take five years to be implemented, and could be altered midway.
  • Do not take Chinese consumers for granted. Their tastes are influenced by global trends, and their expectations for quality services and products are becoming more discriminating. While a foreign brand can confer a degree of cachet, it can also be a negative factor if there is a perception that the brand does not respect China and its culture.
  • Companies engaged in delivering value-added consumer services who do not presently have a China strategy should consider developing a market-entry plan to take advantage of what will become the world’s second-largest market thereof.
  • When developing new markets in China, identifying a local partner is a good market-entry strategy. Finding the right partner (one with full alignment of goals and values) is a critical element here.

Author

Hugh Stephens

Hugh Stephens
Wikistrat Senior Analyst
Former Senior Vice President, Public Policy (Asia-Pacific) for Time Warner


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