China Enters A New Year With A New Normal
This weekend, the population of China and millions of ex-pats around the world will begin two weeks of celebrating the Chinese New Year. Following the 12-year cycle of the Chinese Zodiac, this will be the return of the Year of the Rooster, but to a greatly different China this time.
China is entering a crucial stage of economic transformation, from old model of investment, export and low-end manufacturing focus of 12 years ago into its new model driven by consumption and services sectors. This is supported by modest investment, innovative and green manufacturing guided by the 13th Five Year Plan (2016-2020).
Under the “New Normal” environment, China is confronted with declining growth, rising costs, an aging society, increasing competition and more demanding customers. Surveys conducted by both American and European chambers echo a pessimistic outlook including regulatory issues and lack of right talents.
Pessimistic here is relative. IMF expects China’s GDP growth to soften from 6.6% to 6.5% in 2017, but that is two times faster than world average. The incremental GDP of USD 800 billion, based upon GDP size of USD 12 trillion, is equivalent to an entire Netherlands.
Private consumption will be the key growth driver in 2017, expected to contribute more than half of economy growth. Higher GDP per capita forecast at USD 8,929, coupled with growing momentum from urban and middle classes, the millennial generation and online commerce are expected to fuel domestic consumption growth at around 10%.
Investment meanwhile, is expected to grow between 8% to 9% and continues to be an important contributor in 2017. The government has stepped up efforts to curb a property bubble partly fueled by excessive money supply since end of 2016. Against a backdrop of sluggish global export and trade protectionism sentiment, exports continue to face enormous uncertainties in 2017.
Energy, resource and manufacturing sectors with excessive capacities are expected to continue consolidation in 2017. Increasing car demand from lower tier cities coupled with extended government subsidies are likely to stimulate automotive sales. Healthcare reformation and consistent government spending coupled with active mobile healthcare innovation will drive an active healthcare sector in 2017.
Supported by over 700 million internet users, with over 90% surfing with smart phones, China is already the world’s largest ecommerce market. Ecommerce retail sales are expected to reach USD 1.9 trillion by 2019, four times larger than United States. Homegrown internet and technology companies including Alibaba, Huawei, Tencent and Baidu are actively embarking into leading- edge initiatives including unmanned navigation, robotic technology and artificial intelligence.
The robust digital economy has partly offset the weakening brick and mortal retailers, traditional consumer product and manufacturing sectors, which were adversely affected by the overall weaker economy as well as digital disruptors.
On top of increasing demand of talents from the fast growth sectors especially internet, Ecommerce and services sectors, we will also see demand for talents with the right leadership capability to drive business growth in a harder and maturing business environment.
Cornerstone’s global presence has a strong retained executive search capability in China.
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