With the slowdown of the global economy, China’s economic growth is said to be that of the “L-shaped”, and the country’s market seems to be rather pessimistic about its future prospects. The actual economy is facing a challenging time, while the government and corporate debt continues to rise, and there is the increasing pressure on industrial transformation, at the same time the trade environment is deteriorating. Everything seems to be doom and gloom; if one ignores the potential of the Chinese market, it is difficult to maintain confidence in the Chinese economy in 2017.
The Chinese Central Economic Work Conference emphasizes on realizing steady growth, and that the macroeconomic policy should also be subordinated to the goal of implementing proactive fiscal policy and prudent neutral monetary policy. Anbound Think Tank believes that if the corporate world wants to adapt to the macroeconomic situation and macroeconomic policy, it must have a full understanding of the Chinese market.
In the recently completed research on the economic trend of 2017, Anbound’s chief researcher Chen Gong proposed an important concept, the industrial exchange in the Chinese market. According to Chen Gong, the Chinese market and industries are entering a transformation phase, where the manufacturing industries are moving outward and the service industries are moving inward. This would mean that with the manufacturing industries moving to other countries, China will produce more products and markets to satisfy external demand, therefore the corporate world should keep an eye on the global market. In the past, Chinese corporate only needed to know how to get things done through backdoor or through guanxi, that is through social network and influential relationships. Things are different now. Chinese products and services should be connected to the world and complied with the world standard; the business owners should have global visions and set a higher standard for their manufacturing industries. Their product design, quality and market should be internationalized.
Now foreign manufacturing industry in China is facing more and more competition. Not long ago, the German think tank Mercator Research Center’s Institute for China Studies had released a report and pointed out that “Made in China 2025”, an initiative to comprehensively upgrade Chinese industry will enhance a small group of powerful Chinese manufacturers; large number of sources of funding and strong political support will push these manufacturers to world’s top level, which will make the developed countries facing competitions in the manufacturing sector. The report said that other industrial countries should not have any illusions about the competition in China’s manufacturing sector. Then, does this mean foreign manufacturers will be hopeless in China, or China’s green field investments will become weaker? Will the capital all be flowing outward and no longer inward?
Chen Gong believes that there will not be one-sided situation, because when China’s manufacturing industries are moving outward, the foreign service industries will enter the Chinese market. It is not just foreign manufacturers are relocating, the service industries are relocating too. Unlike manufacturing industries, foreign service industries need workers and consumer markets. China is one of the few emerging markets that has sufficient populations and consumption power. Quality service industries are wanting in China, and though the industries look simple, they require good management, and good management is what China is lacking of. In its researches on China’s supply-side reform, Anbound has pointed out that China should not only improve the supply of products, but also to enhance the level of supply of services, as the high level of service is the next demand in the Chinese market.
A typical example is Disneyland theme park. Regardless if it is in Hong Kong or Shanghai, Disney can have whatever it wants in the country so long as it invests in China. China has no other option because it does not have sufficient service industries like Disney. In fact, service industries like Disney are like an arrow at the end of its fight in other countries, and are eager to look for new markets, and that it is rather popular in the Chinese market.
Chen Gong has pointed out that the Chinese market now is in fact in an industrial exchange phase, where the manufacturing industries are moving out and the service industries moving in. China does not care much that its manufacturing industries are relocating out of the country, what it fears is that some foreign service companies would be moving out of China. This would be a warning sign for the Chinese economy. China should understand this trend to develop the service industries; there is the need for China to relax the control, work on opening-up, reduce taxes and reform so that foreign service industries would enter the country.
China’s market development has entered the stage of industrial exchange; its manufacturing industries are moving outward while the foreign service industries are entering China. The Chinese government and enterprises must adapt to this situation.
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