I really enjoyed the 2015 China Business Conference, held on 11th March 2015 at London’s QEII Centre. It was an energetic, inspiring, informative and educational event, and attended by a significant amount of key players from businesses working in the international trade sector.
I thought it would be a good idea to share my thoughts on various opportunities and issues discussed during the conference, and I hope that this overview will be useful to readers who follow me.
The New Normal
Following the opening speeches from Lord Sassoon, George Osborne and Lord Browne, Minister Ni Jian from the Chinese Embassy presented the opportunities arising from China’s ‘new normal’.
Chinese President Xi Jinping’s announcement that the nation must adapt to the ‘new normal’ pace of economic growth has led many to wonder if this means that China’s rapid growth period is finally over, and indeed whether businesses trading with the country should now prepare for the worst.
Minister Ni Jian explained that ‘new normal’ for China means that the country’s new plan is to focus upon better quality and sustainable growth, rather than simply targeting growth per se. Domestic consumption will be the main engine of growth: China is expected to import $10 trillion worth of commodities in the next five years to feed the demand of its consumers.
China’s growing demand in innovation was another key driver raised by Minister Ni Jian, as were the further opening of service sectors such as insurance and pensions, alongside the internationalisation of the country’s official currency, the RMB.
This encouraging outlook set the scene for the first panel discussion of the conference.
The Chinese Consumer
First to speak was Gordon Orr, chairman of McKinsey Asia, who set the scene of a growing yet challenging environment in the consumer market. He analysed a number of factors that could affect the spending behaviour of middle class consumers in China, ahead of spelling out the key emerging trends to follow.
He stated that the following factors are affecting Chinese consumers:
- China currently has the slowest growth in income and wealth in decades
- All major Chinese cities are in the process of restructuring
- There is low job security for new university graduates
- Having already purchased big ticket items in recent years, people are less willing to do so in again in the immediate future
- Fewer than 10 cities have increased the minimum wage
- Graduate starting salaries have not increased in real terms from 2008 – 2014
- Concerns over robustness of the consumer growth
- Top 100 retailers in China have reported 0% growth
Key opportunities and trends:
- The middle class are more driven towards investment: the Shanghai Stock Exchange experienced a 993% increase in new account registrations during 2014
- Consumers’ focus is shifting from wealth to health, indicating they are likely to spend on health related products
- Consumers are likely to pay for convenience (e.g. products that save them time)
- ‘Empty nesters’ in China (aged 60+) will consume products or services that look after them
- Following the great consumer boom in the last few years, consumers are now looking for niche and personalised products
The panel further discussed the impact of social media, e-commerce and digital technology on Chinese consumers, concluding that an integrated approach with regular adjustment is the best approach for brands looking to reach this audience.
The Jim O’Neill Keynote
I’ve long been a fan of Jim O’Neill, the former chair of Goldman Sachs who coined the term ‘BRIC’ back in 2001, and his keynote did not disappoint. He delivered a presentation entitled Growth & China: Quality vs Quantity.
O’Neill explained that “China is the only BRIC not to disappoint”: in terms of GDP, the Chinese economy will effectively create “another India” every two years and a United Kingdom every three, even at the slower growth rate of 7%
He went on to explore the emerging opportunities in the Chinese consumer economy. Though the luxury sector itself won’t see major growth in the next few years, the ‘luxury light’ sector certainly will. The definition of ‘luxury light’ includes healthcare and consumer products for the broader (growing) middle class and lower income group.
Innovating China
During the conference, I also attended a session on Education, Innovation & Entrepreneurship, chaired by China business advisor Nathalie Cachet-Gaujard; formerly Head of International Partnerships and Business Development at the University of Central Lancashire.
The panel first discussed innovation trends in China, including:
- Education innovation
- Innovation amongst SMEs (advanced manufacturing etc.)
- Environmental tech innovation
During the Q&A session, questions from the floor highlighted a number of practical issues that UK companies face; such as due diligence, risk averse attitude and the pace of liquidity from Chinese partners. However, the room agreed that the scale and level of activities, alongside interest in technology and innovation in China is unprecedented. Through the discussion it was concluded that there may indeed be an opportunity for British companies to assist partners in China; helping them to internationalise their approaches to innovation investment.
China Outbound Investment
The China Outbound panel was chaired by Stephen Phillips, chief exec of the China-Britain Business Council (CBBC).
First to present was Professor Lan Qingxin from Beijing’s University of International Business and Economics. He told the audience that whilst examining the country’s outbound investment figures it is critical to understand that only acquisitions made at enterprise level are regarded as ‘investment’ in China: individual investments in property / real estate are counted simply as ‘spending’. Further, Chinese outbound investment is about to surpass inward FDI.
China’s Government is keen to see Chinese companies internationalise, in order to secure resources, buy international management expertise and grow the image of China and its brands internationally.
The conference drew to a close with an outstanding drink reception, providing speakers and attendees the opportunity to network and further discuss their business ideas.
It’s fair to say the conference was a huge success, and it will certainly be a fixed date in the calendar for me in 2016.
I really enjoyed the 2015 China Business Conference, held on 11th March 2015 at London’s QEII Centre. It was an energetic, inspiring, informative and educational event, and attended by a significant amount of key players from businesses working in the international trade sector.
I thought it would be a good idea to share my thoughts on various opportunities and issues discussed during the conference, and I hope that this overview will be useful to readers who follow me.
The New Normal
Following the opening speeches from Lord Sassoon, George Osborne and Lord Browne, Minister Ni Jian from the Chinese Embassy presented the opportunities arising from China’s ‘new normal’.
Chinese President Xi Jinping’s announcement that the nation must adapt to the ‘new normal’ pace of economic growth has led many to wonder if this means that China’s rapid growth period is finally over, and indeed whether businesses trading with the country should now prepare for the worst.
Minister Ni Jian explained that ‘new normal’ for China means that the country’s new plan is to focus upon better quality and sustainable growth, rather than simply targeting growth per se. Domestic consumption will be the main engine of growth: China is expected to import $10 trillion worth of commodities in the next five years to feed the demand of its consumers.
China’s growing demand in innovation was another key driver raised by Minister Ni Jian, as were the further opening of service sectors such as insurance and pensions, alongside the internationalisation of the country’s official currency, the RMB.
This encouraging outlook set the scene for the first panel discussion of the conference.
The Chinese Consumer
First to speak was Gordon Orr, chairman of McKinsey Asia, who set the scene of a growing yet challenging environment in the consumer market. He analysed a number of factors that could affect the spending behaviour of middle class consumers in China, ahead of spelling out the key emerging trends to follow.
He stated that the following factors are affecting Chinese consumers:
- China currently has the slowest growth in income and wealth in decades
- All major Chinese cities are in the process of restructuring
- There is low job security for new university graduates
- Having already purchased big ticket items in recent years, people are less willing to do so in again in the immediate future
- Fewer than 10 cities have increased the minimum wage
- Graduate starting salaries have not increased in real terms from 2008 – 2014
- Concerns over robustness of the consumer growth
- Top 100 retailers in China have reported 0% growth
Key opportunities and trends:
- The middle class are more driven towards investment: the Shanghai Stock Exchange experienced a 993% increase in new account registrations during 2014
- Consumers’ focus is shifting from wealth to health, indicating they are likely to spend on health related products
- Consumers are likely to pay for convenience (e.g. products that save them time)
- ‘Empty nesters’ in China (aged 60+) will consume products or services that look after them
- Following the great consumer boom in the last few years, consumers are now looking for niche and personalised products
The panel further discussed the impact of social media, e-commerce and digital technology on Chinese consumers, concluding that an integrated approach with regular adjustment is the best approach for brands looking to reach this audience.
The Jim O’Neill Keynote
I’ve long been a fan of Jim O’Neill, the former chair of Goldman Sachs who coined the term ‘BRIC’ back in 2001, and his keynote did not disappoint. He delivered a presentation entitled Growth & China: Quality vs Quantity.
O’Neill explained that “China is the only BRIC not to disappoint”: in terms of GDP, the Chinese economy will effectively create “another India” every two years and a United Kingdom every three, even at the slower growth rate of 7%
He went on to explore the emerging opportunities in the Chinese consumer economy. Though the luxury sector itself won’t see major growth in the next few years, the ‘luxury light’ sector certainly will. The definition of ‘luxury light’ includes healthcare and consumer products for the broader (growing) middle class and lower income group.
Innovating China
During the conference, I also attended a session on Education, Innovation & Entrepreneurship, chaired by China business advisor Nathalie Cachet-Gaujard; formerly Head of International Partnerships and Business Development at the University of Central Lancashire.
The panel first discussed innovation trends in China, including:
- Education innovation
- Innovation amongst SMEs (advanced manufacturing etc.)
- Environmental tech innovation
During the Q&A session, questions from the floor highlighted a number of practical issues that UK companies face; such as due diligence, risk averse attitude and the pace of liquidity from Chinese partners. However, the room agreed that the scale and level of activities, alongside interest in technology and innovation in China is unprecedented. Through the discussion it was concluded that there may indeed be an opportunity for British companies to assist partners in China; helping them to internationalise their approaches to innovation investment.
China Outbound Investment
The China Outbound panel was chaired by Stephen Phillips, chief exec of the China-Britain Business Council (CBBC).
First to present was Professor Lan Qingxin from Beijing’s University of International Business and Economics. He told the audience that whilst examining the country’s outbound investment figures it is critical to understand that only acquisitions made at enterprise level are regarded as ‘investment’ in China: individual investments in property / real estate are counted simply as ‘spending’. Further, Chinese outbound investment is about to surpass inward FDI.
China’s Government is keen to see Chinese companies internationalise, in order to secure resources, buy international management expertise and grow the image of China and its brands internationally.
The conference drew to a close with an outstanding drink reception, providing speakers and attendees the opportunity to network and further discuss their business ideas.
It’s fair to say the conference was a huge success, and it will certainly be a fixed date in the calendar for me in 2016.