We kick of our weekly summary with another note on the World Cup which was, we are told by ChinaSmack , “made in China”. It should be no surprise that China is the source of official balls, stadium seats, mascots, vuvuzelas, condoms (!?), and a variety of merchandise. It is a useful reminder of how far supply chains rely on China, and hard-pressed Chinese workers.
And those workers are hard-pressed, as we have reported recently. The pressures continue, and labour issues remain a key political, social and business issue. Minimum wages are rising, unions are promoting “collective consultation”, and some businesses (such as Foxconn) are looking inland for lower production costs (and, we suspect, media profile).
Others (such as Li & Fung) are making more positive and pro-active moves, and are targeting higher-end fashion, as well as sales in second and third-tier Chinese cities. Others would be well-advised to watch their strategy in action.
The move of businesses inland, and to the lower-tier cities, ties in with the growth of urban China. It was reported in the Washington Post that China’s urban population will overtake the rural one within 5 years (and that the population will hit 1.4 billion in 2015). How these cities develop will be critical not only to the economy, but also the environment – an issue highlighted in the Economist.
The economy, like the cities, has been growing fast. Somewhat faster than initially thought…in the latest re-statement of GDP growth the 2009 figure has been revised up to 9.1% (and we have a few reports to update!). But other figures are coming down, including Goldman Sach’s 2010 GDP estimate, which is now 10.1% (and still higher that some others we have reported). Cooling of the economy is seen to be a good thing, especially as the pressure of inflation remains. What lies beyond 2010? According to a World Bank report we can expect – among other things – slower growth (6.7% in 2020), and a more balanced economy, helped by growth in domestic consumption.
It is clear that, even if China’s growth slows, it is going to become increasingly significant as a market. The McKinsey Quarterly has suggested that it could be a “second home” market for many companies – and highlight the importance of developing market share. In other news GM reported that its China sales overtook those in the US for the first time. Expect to see more of this (and, perhaps to plan for it) in the future.
While the opportunities are huge, China risk remains a concern. Google is still in the news in relation to its ongoing problems – the latest chapter being the change to the automatic re-direct from its .cn site to its site in Hong Kong, and the introduction of a hyperlink instead. It is thought the move is related to its ICP license renewal (which, this week, is still reported to be under review).
As any Google search will tell you, there are challenges to doing business in China, and there has been much news on these recently. The latest survey suggesting nervousness comes from the EU Chamber of Commerce in China: ‘”The discretionary enforcement of laws and regulations, opaque and burdensome registration processes as well as concerns regarding the protection of intellectual property rights continue to be top concerns for European business in China,” Jacques de Boisseson, the president of the chamber, said in a statement’. Though not such a grabbing headline, it should also be noted that “78 percent of respondents were optimistic overall about the growth outlook, up from 65 percent last year”. So it is not all doom and gloom.
But perhaps GE’s boss put it most bluntly (see our “Don’t Quote Me” post here ).
All the original tweets and links can be found below:
1. chinaSMACK Please RT: 2010 South Africa World Cup, “Made In China” http://bit.ly/9q75q6 
2. @MalcolmMoore Excellent @chinabeat roundup of what to read to understand China’s labour situation. http://twurl.nl/xzsvoi 
3. RT @christinelu: “Billionaire Brothers…” [Forbes] — Li & Fung smart to go luxury AND hit 2nd/3rd tier cities first. http://ow.ly/25BIo 
4. 700m within 5 yrs RT @CDT: China’s Urban Dwellers to Exceed Rural Population: From the Washington Post… http://bit.ly/cfbpgR (se also: RT @TheEconomist: How Asian cities are built will determine the prospects for global carbon emissions http://econ.st/cStdBJ )
5. Non-static stats. 9.1% RT @BeyondBrics: Asia markets wrap: China revises 2009 GDP, inches closer to Japan http://bit.ly/awtPDd 
6. Cool(ing). GS reduced China 2010 GDP est to 10.1% RT @BeyondBrics: Why a slowing Chinese economy is a good thing http://bit.ly/bsigvQ 
7. RT @chinahearsay: Extending the horizon—China’s medium and long term economic outlook http://goo.gl/bqPU 
8. “Building a second home in China” from @McKQuarterly http://ht.ly/25sWy (see also: A second home market… RT @thesinoglance: In a first, China sales for GM and partners surpass those in U.S… http://bit.ly/9SinhZ )
9. A scrambled search RT @lonniehodge: Google scrambles to save Chinese licenses http://tinyurl.com/28n5orj 
10. Predictable… RT @peijinc: EU firms wary of unpredictable China rules: survey http://is.gd/d8sJX