Executive Search in China– 2016 Outlook
20 years of double digit growth
has transformed China
Consensus from business communities indicate Chinese economic growth is softening towards a moderate mid-6% in 2016 with the IMF and The Economist forecasting 6.3% and 6.4% respectively. Correction is unavoidable after a breakneck pace in recent decades. The government is expected to steer a more balanced economic model based on sustained domestic spending as stipulated by the 13th Five-Year Plan
The economic transition expected to be choppy as the government measures are a response to both slowing global economy and internal structural problems, especially shrinking labor force supplies, rigid currency and financial infrastructure and overstocked property markets. The government will gradually relax fiscal deficit restraint and cut excess capacity which is dragging on the productivity of state-owned-enterprises, while making the transition from dependence on investment and exports to greater domestic consumption.
Driven by lower global commodity prices and weakening domestic demands, inflation is expected to stabilize in the range of 1.8% and 2.4% as estimated by the IMF and The Economist respectively.
The demographic impact of the One Child Policy is being felt as the supply of youth labor is declining while the population aged 60 and above is approaching 212 million or 15.5% of the population in 2014. On the bright side, the aging populations (with fewer children) are armed with high purchasing power as GDP per capital is expected to reach US$8500. Measures undertaken by the government to cushion the demographic impact include relaxation of the One Child Policy and attracting overseas Chinese talent to return to China.
Driven by government led healthcare reformation with increasing spending, sectors for pharmaceutical, medical devices, elderly care, rural healthcare facilities, bio technology and insurance are expected continue to grow healthily in 2016.
China’s mobile phone and internet users hit an all-time high in 2015. Mobile users exceeded 1.2 billon (penetration of 90%) and mobile internet users exceeded 630 million (90% of total internet users), laying a solid foundation for further digitization and mobilization in 2016.
Along with government support of technology advancement and automation via the Manufacturing 2025 blueprint, the technology sector is expected to continue to grow strongly in 2016. Employment prospects for talent with specific skills in technology innovation is encouraging
Brick-and-mortar retail sectors, especially department stores, hypermarkets and supermarkets are expected to continue to suffer from the softer economy, stiffer online competition and labor cost escalation. Store consolidations are expected to continue in 2016
With Manufacturing PMI consistently below 50 in 2015, the sector is expected to continue to contract in 2016. Slower global demand and labor cost increases continue to pose challenges to Chinese manufacturers. The latest currency depreciation against US Dollar (from 6.12 on 12 Jan 2015 to 6.52 on 5 Jan 2016) may provide some short term breathing space, but the consensus from experts is for continued restraint on recovery in 2016 due to over capacity and increasing labor cost.
Despite this, large Chinese enterprises are embarking upon product innovation, automation, brand building and global expansion and are expected to hire talent that can support their business transformations
Sales growth of only 0.31% for the first three quarters of 2015 indicate the automobile industry is slowing after breakneck growth over the last decade in China. A larger base (car sales increased from 2 million units in 2000 to 24 million units in 2015 ), softening economy, environmental and traffic pressures, and increased production capacities are challenges faced by the industry. Nevertheless, strong growth is expected in SUV and electrical vehicle segments along with innovations in internet technology applications.
Consumer products are expected to be soft, affected by weakening economy and online purchases. However, companies with longer term plans continue to invest in talent to support longer term strategic development. China is currently the world’s second largest consumer spending country at US$ 4.6 trillion in 2015.
Commodity, oil and gas and mineral sectors is expected to undertake consolidation actions to optimize capacities. Some state-owned steel mills have announced closures of unproductive steel mills.
The services sectors is expect to grow and generate more employment. The IMF foresaw 10 million jobs being created annually in the Chinese urban market
A Cornerstone CCC survey conducted in October 2015 indicated business leaders in China maintained ambitious sales forecast of 17% for the year 2016, driven by new product innovation, M&A, domestic and global expansions. Expectation of salary increase meanwhile, is more cautious and range between 6% to 7%.
Driving organizational and leadership capabilities, talent sourcing, development and retention to support 2016 growth targets and strategic imperatives remain top priorities for business leaders.