BNAD596- Global Business Experience (China)
7 December 2012
1. The Chinese economy grew only 7.4% in the third quarter of 2012. If the economy finishes the year as projected it will mark a 13-year low. What are some reasons for the economic slowdown? Is the Chinese economy maturing?
After years of robust double digit growth, China’s Q3 economic growth of 7.4% was seen by many as the beginning of the end for China, in terms of economic growth sustainability. However, the decline in growth needs to be put in perspective, that certain industries were affected more than others. This was the case with the manufacturing industry and real estate sectors. The primary drivers for the economic slowdown were: new home prices are continually falling due to the Chinese government’s policies to rein in rising inflation, Europe’s debt crisis and slower than excepted economic growth in the U.S. which has diminished the demand for Chinese products (exports) and therefore caused a decline in manufacturing growth.
Though opinions and discussions abound as to the long term meaning of China’s economic slowdown, there is no question that the Chinese economy is in fact maturing. Experts agree that as China moves away from low-cost manufacturing toward sustainable growth through high value added businesses and from infrastructure and export led growth to domestic consumption (The new Chinese economy- Strategy-business.com) the China we know today will look very different in the future. What will occur are regional shifts in wealth, customers that are more informed thereby more demanding and discerning, and Chinese companies more motivated to change/take advantage of the changing landscape.
2. Multinationals should consider realigning their traditional strategy in China of focusing on top-tier coastal areas towards the lower-tier interior. Why? What will be involved in multinationals realigning their footprint and operating model?