Doing Business with a Changing Chinaccilc.pt/en/wp-content/uploads/2017/07/doing... · 2001-2005 2006-2010 2011-2015 New Cars. Finance Online Manga Chemicals. Overseas Shopping Travel

Doing Business with a Changing ChinaBo JiAssistant DeanChief Representative for Europe

June 30, 2016

Changing Business Environment1

China’s Changing - 13FYP2

Opportunity for Western Countries3

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China Business Environment

China’s Inexorable Rise Challenges and Changes in the Economy

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China’s Inexorable Rise

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Economic Slowdown

In 2005, 12% growth, increase in GDP of USD 274 billion, USD 2.3 trillion

In 2015, 6.9% growth, increase of USD 790 billion, with its GDP of USD 11.3 trillion

This is almost three times greater than the absolute growth in 2005.

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RMB Internationalisation

Second-largest economy in the world Largest exporter and second-largest importer in the world Inbound foreign direct investment (FDI) ranks first in the world Payment- the 7th most used payment Trade finance- the 2nd most used trade finance currency FX trading – the 8th largest FX trading currency

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One Belt One Road

OBOR is expected to help China realize its ‘Going Out’ strategy Focus on improving and creating new trading routes, links and business

opportunities between China, passing through over 60 countries along the way, across Asia, Europe, the Middle East and Africa.

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Made in China 2025

In 2015, the State Council unveiled a national plan, ’Made in China 2025’, which sets a new course for Chinese manufacturing in the next decade.

The aim is to produce more advanced technology and products with less environmental damage and enhanced use of the Internet for intelligent manufacturing, with a view to improving international competitiveness and the long-term prospects of Chinese equipment exporters.

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Rapid Growth of Mobile Internet Market

Number of mobile internet users in China from 2008 to 2018 (in millions)

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The Industry has reached an “internet +” stage

Service industry

Consumer goodsIndustrial products and raw materials

Online gamesMusic

Mobile Phones

Maternal & Child Supplies

CosmeticsTelecom Prepaid

Home Appliances

Household Electricals

Clothing

FoodStationery

Online Procurement

Other Services

Digitals

Steel

Other Industrial Products

Deg

ree

of

Influ

ence

Duration of Effect

Furniture

Furniture

Jewellery

2001-2005 2006-2010 2011-2015

New Cars

Finance

Online Manga

Chemicals

Overseas Shopping

Travel Transportation

Plastics Construction Machinery

TakeawayManicure Fitness

Flash deals Auto Service

Used CarsBuying/Renting Houses

Laundry

Medicare

Show Store Chains

Hotel

Information

Reading

Plane Tickets

Movie

KTV

Education

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Growing of Ecommerce

Alibaba 11.11 Shopping Festival- the biggest online shopping day in the world!

A Single Chinese Company Dwarfed All Of America's Black Friday And Thanksgiving Online Sales In One Day.

Alibaba Group Generated USD 14.3 Billion of GMV on 2015 11.11 Global Shopping Festival

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China Business Environment

China’s Inexorable Rise Challenges and Changes in the Economy

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Rising Labour Costs & Ageing Population

Labour costs for companies are higher today than they ever have been, not least in the crowded coastal provinces.

The situation is brighter inland and in the west of the country, where the government has been encouraging growth, based often on higher levels of surplus labour.

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Stock Market & Property Prices

Pricing in Beijing, Shanghai, Shenzhen is now approaching those of major international property destinations such as London, Hong Kong and Tokyo.

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Corruption Clampdown

Since assuming office in 2012, President Xi Jinping has spearheaded a significant anti-bribery campaign in China.

Anti-corruption efforts may negatively affect business efficiency and investment led growth in the short term, in the long term they should help China unleash the potential of private investment and create better conditions for long term growth.

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Changing Import Mix

Having grown at an average of 13% per year from 2007 to 2013, import growth all but halted in 2014, and in the first half of 2015 imports have fallen quite significantly –15%.

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Changing Import Mix

There is still an increasing hunger for imported consumer goods amongst China’s middle income demographic, especially beyond the developed coastal cities, and purchases are increasingly conducted online – the Chinese government predicts the online retail market will expand by 30% in 2016

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Top challenge

EUSMECentreBusinessServiceSurvey2014

EUCCCBusinessConfidenceSurvey2015

GermanChamberBusinessConfidenceSurvey2015

FrenchChamberBusinessClimateSurvey2014

CBBCBusinessClimateSurvey2013

Language and culture

Chinese economicSlow down

Finding qualified staff Raising labor costs Bureaucracy

Attracting andRetaining talent Raisinglabourcosts Raising labor costs Skilled staff shortage Rising costs

Market accessbarriers

Global economicslowdown

Retaining qualifiedstaff

Chineseeconomicslowdown


Ambiguous rules and regulations

Market accessbarriers Currencyrisks

Delinquent paymentsFrom customers


FinancingCompetition fromChinese private-owned enterprises

Bureaucracy Global economicslowdown

Corruption and localprotectionism

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Top challenge

EUSMECentreBusinessServiceSurvey2014

EUCCCBusinessConfidenceSurvey2015

GermanChamberBusinessConfidenceSurvey2015

FrenchChamberBusinessClimateSurvey2014

CBBCBusinessClimateSurvey2013

Language and culture

Chinese economicslowdown

Finding qualified staff Raising labor costs Bureaucracy

Attracting andRetaining talent Raising labor costs Raising labor costs Skilled staff shortage Rising costs

Market accessbarriers

Global economicslowdown


Chinese economicslowdown



Market accessbarriers Currency risks

Delinquent payments from customers


FinancingCompetition fromChinese private-owned enterprises

Bureaucracy Global economicslowdown

Corruption and localprotectionism

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China’s Changing2

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12th FYP & 13th FYP

The 12th Five-Year-Plan had set its main target on transforming China from an export driven economy to one built upon local consumption growth.

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China enters its next new normal with the 13th Five-Year-Plan

Three key issues: The strengthening of China’s energy

efficiency The implementation of its

environmental protection efforts The tackling of China’s widening gap

between the rich and the poor

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Highlighted Concepts of Development

Innovation Coordination

GreenDevelopment

SharingOpening up

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GreenDevelopment

SharingOpening up

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Innovative Development as the backbone of the new development paradigm

Develop new drivers of

development

Establish new spaces for

development

Upgrade industrial structure

Strengthen innovation in science and technology

Modernize agriculture

Deepen institutional

reforms

Innovation development 25

Develop new drivers of development

Domestic consumption: Increase domestic consumption and guide consumers toward green, healthy and safe goods and services

Investment: Encourage private investments through financial reform and financial innovation

Export: Upgrade China’s position in global value chains by cultivating strengths in technology, standards, brands, quality and service


Establish new spaces for development

Geographical regions: Establish economic belts along the coastline, rivers and major transportation lines, and develop city clusters and hub cities as regional centers

Emerging industries: Nurture environmental, biotechnology, IT, smart manufacturing, high-tech equipment, and new energy industries; and support upgrading of traditional industries

Infrastructure: Accelerate infrastructure construction, liberalize natural monopoly industries (e.g. electricity, natural gas, telecommunications)

Internet+: Develop Internet of Things (IOT), shared economy and big data strategy


Upgrade industrial structure

“Made-in-China 2025”: Improve efficiency, product quality and brand reputation

Strategic industries: Development emerging industries with the help of government investment

Smart manufacturing: utilize new technologies in manufacturing Develop modern services: support further market access to services,

upgrading both production services and consumption services


Deepen institutional reforms

Administration: Improve efficiency and increase delegation of power State-owned enterprise (SOE): improve operational efficiency Macroeconomic control: progressive price liberalization for commodities

and services Fiscal system: optimize taxes to facilitate development, increase

transparency of budgeting Financial system: Marketization of exchange rate and interest rates, bigger

share of private-sector capital in the banking system, innovative financial services, reform of supervision framework

Business environment: reduce red tapes and facilitate fair competition




GreenDevelopment

SharingOpening up

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Coordinated Development

Coordination among regions

Balance between rural

and urban areas

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Coordination among regions

• Development strategies for each region • Freer flow of factors of production • More equal access to public services

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Balance between rural and urban areas

Development of small- to medium-sized cities Increase of rural per capita income Improvement in rural infrastructure and public services Reform of “hukou” system

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GreenDevelopment

SharingOpening up

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Opening Up

The “two-way opening up” and trade structure upgrading

Actively participate in global economic governance

The Belt and Road Initiative Reform institutions for international integration

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The “two-way opening up” and trade structure upgrading

“Two-way opening up”: Attracting foreign investments and encouraging China enterprises to go abroad

Optimize trade structure, improve border crossings and enhance economic cooperation zones

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Actively participate in global economic governance

Participate in rule-making Promote multilateral trade agreements

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The Belt and Road Initiative

Enhance co-operations between China and Belt and Road countries, with private enterprises taking a leading role

Enhance cooperation with international financial institutes on AIIB, Silk Road Fund and New Development Bank

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Reform institutions for international integration

Implement national treatment and negative list for foreign enterprises Financial liberalization: supporting RMB’s inclusion in Special Drawing

Right (SDR) and its progress toward free convertibility. Gradually release restriction for overseas investment

Signing bilateral investment agreements

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GreenDevelopment

SharingOpening up

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Green Development

Accelerate the Development of

Functional Regions

Support Clean Production and Low

Carbon EconomyConserve Resources

Environmental ProtectionHarmonized

Development Between Nature and Mankind

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Accelerate the Development of Functional Regions

Define the key functions (e.g. ecological conservation, agricultural, industrial) of certain geographical regions

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Support Clean Production and Low Carbon Economy

“Energy revolution” – shift to renewable energy Support recycling and low-carbon transportation systems Control emission by strengthening regulation and supervision

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Conserve Resources

Promote conservation among industries and consumers, emphasizing on water resources

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Environmental Protection

Reform environmental governance structure, e.g. set up a pollution permit system

Preserve and restore natural environments

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Harmonized Development Between Nature and Mankind

Incorporate ecological concerns in urban planning and management of agricultural areas

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GreenDevelopment

SharingOpening up

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Sharing Development

Improve supply of public goods and services, especially in less-developed and poor rural areas

Implement two-child policy to counter aging population Increase the size of funding dedicated to poverty reduction and improve

infrastructure and public service in poverty-stricken regions

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Sharing Development

Improve employment support policy and services, and provide vocational training to raise labor quality

Expand middle-income group and significantly raise income for lower income group

Improve social insurance system to cover all residents in China and lower insurance rates to a reasonable level

Improve public health system through deepening medical reform

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Opportunities for Western Company3

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Opportunities for Western Company

1. The end of cheap and low-quality China 2. Nurturing waves of entrepreneurs and formidable competitors in China 3. Business environment changing for companies 4. City clusters in urbanization and regional development would have

implications for companies’ locational strategy 5. Promoting cross-border ecommerce are changing trade pattern 6. Changes in the population policy and possible implications 7. Rising expectation on companies’ social and environmental responsibilities

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Summary

Overview Business Environment

China’s Changing - 13FYP

Opportunity for Western Countries

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Doing business with a Changing ChinaBo JiAssistant DeanGlobal Executive Education

June 30, 2016

Documents

Doing Business with a Changing Chinaccilc.pt/en/wp-content/uploads/2017/07/doing... · 2001-2005 2006-2010 2011-2015 New Cars. Finance Online Manga Chemicals. Overseas Shopping Travel