Over the last inter-period break for the Sauder MBA Program, I had the privilege to be one of the MBA candidates to visit companies in Hong Kong and Shanghai. Prior to this visit, I had only visited China as a regular visitor but in the past few years, whether in my education or professional life, I have witnessed how China has emerged as an economic power in its own right. I figured this visit to China would be a great opportunity to understand business issues and culture in this Asian giant.
Some of the takeaways I obtained from Trek China are listed below, and they are in no order of priority but just some points on the current state of China’s economy and hopefully would provide some one from outside the country pointers on where the country is headed and how companies can succeed in China.
1) Stability is still a key issue for the country
The economic growth has caused problems for China and as such the government sees stability as key to maintaining this growth with the aim to improve more lives within the country. This is perhaps a compelling reason for the government to crackdown on issues that may de-stabilize the country (ie. currency regulation)
2) Chinese companies are growing to be global leaders
A European consulting firm that we visited mentions cases whereby Chinese conglomerates are acquiring to grow their businesses. No longer are they contend with making low margin goods for the rest of the world. In fact with the recent rise of companies like Lenovo and Huawei in recent years, it should be noted that Chinese companies are headed to take their own right in the global marketplace as leaders. One company of note is Sany Heavy Construction, a manufacturer of construction machineries that have become a technology leader in concrete pumps through acquistions. Another is Geely, a private car company that recently purchased Volvo Cars.
3) Property in China is still showing good prospects (aka Bubble Fears are Overblown)
We visited one of the world’s premier property management company, and the director who gave the presentation pointed out that while slowdown exists in new home sales in China, the prospects in the long run for residential property is still there as long as the economy keeps on growing at a healthy pace. This demand for housing will come from upgraders as well as increasing urbanization. In addition, tier one cities commercial properties would still remain a bright spot, while industrial properties is expected to see increased demand and short supply might support this segment of the market.
4) While Shanghai is a key commerical center, Hong Kong still reigns in terms of finance
Yup that is likely to remain in the next few years at least until the Chinese Yuan becomes a global standard. Not only that, the regulatory environment that has been established in HK makes it difficult to beat, along with English being its main language. However banks in Hong Kong would definitely need to be savvy in trading the Yuan and gaining access to high net worth individuals in China, for its success.
5) Companies that succeed elsewhere might not have the same story in China
One case in point: Google. China is unlike any other economy due to the difference in culture within the country. Even as an Overseas Chinese, I am still learning to how businesses in the country operate. Guanxi is definitely important, but so is diplomacy, and understanding Chinese idioms and history would definitely be a plus. One Chinese saying is: ‘Upon crossing the river, do not burn the bridge’, and what it means is that one should always leave an opening to retreat nicely when negotiating with Chinese companies as there can never be eternal foes. Google still maintains a presence in China, with its offices in Shanghai located within the Shanghai World Financial Centre, a landmark skyscraper in Pudong. Another thing of note is how a small European consulting firm can beat global firms like McKinsey and Bain to become a premier consulting firm in the country.
6) High-end retail has great prospects
Consumption by wealthy Chinese citizens is growing and this was highlighted by a Chinese private equity firm that is investing in brands as well as Louis Vuitton who is targeting opening more stores across the country. One would be suprised to note that even second tier cities in China has the capability to support LV flagship stores. Overall, this increase in consumption can benefit the whole economy in propping up employment while woes in Europe might reduce exports.
These are some of the snippets of thoughts I had after visiting the companies in China and while expats are still welcome, the country is experiencing a larger number of qualified local managers that are proficient in English and Chinese, and this means that it will get more and more difficult for foreigners to partake in this economic growth from the inside. However, the amount of opportunities within China are so vast that it makes sense to learn Chinese in order to work with companies in the country. And for that, I am glad that I received my education from Singapore which has a history of providing bilingual education to its students.