The new Chinese leadership set the economic agenda for 2013 at the past December Central Economic Work Conference meeting. Among the goals outlined at this conference are: continued expansion of domestic demand, protection of foreign investor’s interest and job creation. Emphasis on increased domestic demand is in line with the current 12th five year plans’ goal to move china from export led growth towards consumption.
Considering that economic growth helps to justify communist party rule, continued growth is always at the forefront of priorities. The move towards pro-consumption caters to this. As demand for Chinese exports was significantly reduced by the Global Financial crisis, the weakness of relying on export led growth was highlighted. Even once this crisis has been overcome, it is questionable that it will quickly bounce back to pre-crisis levels. Hence, the Chinese government is shifting its economy to rely increasingly towards consumer led growth and domestic consumption. 2012 was actually the first year in over a decade where China’s growth was consumption led rather than investment or export led; it contributed to 55% of Chinese GDP growth. This is highlighting the future potential of China’s consumption market.
Though the long-term goal is to shift China’s economy towards increased domestic reliance this by no means that China’s business focus is becoming less international. In fact Xi Jinping at a meeting with foreign academics declared: “We [China] can’t continue to rebuild the nation if we shut our doors to the outside world.” Xi Jinping’s actions so far have been one’s of signaling increased accessibility and coming economic reforms. At the above-mentioned meeting he invited foreign academics to comment and provide suggestions on the future development of China. Furthermore, his first official visit outside Beijing was to Shenzhen, which is a long-standing testing ground for Chinese reforms. Hence this trip has been widely acknowledged to be a signal of his reformist’s intentions, which should lower market entry barriers in the future.
This emphasis on economic reforms, and increased accessibility coupled with gradual increased domestic consumption creates an environment of significant potential in China. Though the new leadership has been in office merely a few months, and it is to be seen how much of this is mere talk. At this point any business that can cater to domestic consumption, service industries, health care, retail and technology should find a plethora of opportunities in China.
Author: Radika Khosharay, Business Development Associate