Too late to invest in China?
Over the past few years, many economists have noticed that China’s GDP growth has slowed down significantly over the years. The economists have also observed that the producer prices have continued to fall, and various other indicators of economic activity – industrial production, investment and imports – have declined drastically. With thirty years of exponential GDP growth and world’s second largest economy, China has faced slowdown and is now challenged with significant macro-economic questions.
This rapid economic ascendance has brought in the new challenges which include high inequality, rapid urbanization, external imbalances and even challenges to environmental sustainability. Reports by The Wall Street Journal stated that dependence on real estate, construction and smokestack industries reached its limits and the President Xi Ping and other leaders are constricted with options to shore up the economy. Another important factor to be noted is that the Chinese growth was earlier based on unsustainable levels of investment. According to many economists, the significant changes in the policies are required in order to help China’s growth to be sustainable.
Several studies conducted revealed that the weapon to address the economic slowdown of restructure the economy in China is by tapping the domestic market which is most realistic in absorbing the extra Chinese capacity.
The study conducted by CPhI revealed that the overall picture of Chinese pharma is extremely positive with over 6,000 domestic pharmaceutical manufacturers accounting for 70% of the market, and around 14,000 domestic pharmaceutical distributors. Correspondingly, in spite of lagging economy, technology sector in China has managed to prosper. Chinese market being one of the largest smartphone markets in the world, has contributed to $16.8 billion in sales in 2015, contributing to the success of the companies like Apple Inc. This studies demonstrate continued potential for foreign companies, who want to tap into the Chinese market.
According to the Commerce Ministry in Beijing, China has attracted $68.4 billion (63.2 billion euros) in foreign direct investments (FDI) in first six months of 2015. Although growth rate is lesser compared to the previous years, FDI in China is on the rise again.
It is important to note that though China’s broader economy is slowing, its young entrepreneurs are driving a wave of start-ups which is serving to be a bright spot for the economic landscape. The encouragement for mass entrepreneurship has driven the growth of angel investments to a very large extent. Studies reported by Global Times reveal that the Chinese angel investors prefer to invest mostly on technology, media and telecom industries. According to the reports, these sectors have made up to 80% of the fund recipients in 2014.
Though, market in China is changing and volatile, it still remains important and offers large business opportunties, if strategies and tactics are chosen considering Chinese business characteristics. As China’s integration with the global economy is increasing, this has paved way for wide array of possibilities. If you are looking forward to invest in China, then it is important to adopt a carefully planned approach that promotes strategic growth agenda.
About the Author:
Urs Eller, Co-Founder and President of ETAC Consulting. A company run by professional experts, providing management consulting and financial services. The company is based in Switzerland and with local presence in Singapore and Shanghai.
