148

Business operating environment

14

36

2Economics & growth

Lab ur human capital

Financing environment

Science & technology

420million

591million

51.2%

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012 7.8%

9.3%

10.4%

9.2%

9.6%

14.2%

12.7%

11.3%

10.1%

10.0%

2008 2012

$4,522trillion

$8,227trillion

2000 2010

$3,414 $6,091

The Thoughts of Chairmen Now: insights from China’s business leaders

The economy

CommunicationChina leads in number of mobile phones followed by the United States and Brazil.

DynamismGlobal Dynamism Index (GDI) 2013* China ranks three in the Grant Thornton GDI 2013 report, climbing from 20 in 2012. This makes the economy the second biggest climber behind only the Philippines (which rose 25 places). The improvement in China is largely driven by its science & technology ranking, where it climbed eight places to rank 14 on the back of strong IT and R&D spending growth. It also ranks one for labour & human capital and ranks two for economics & growth. It dropped five places for the dynamism of its business operating environment and remained the same for financing environment.

In GDP, China is second only to the United States ($15,685 trillion GDP), which it is expected to surpass in less than a decade.

Savings Rate; 53% (2011)Chinese people are savers. The overall national savings rate is 53 per cent of GDP. In comparison, the savings rate for the United States is 12 per cent, the United Kingdom, 13 per cent; Brazil, 17 per cent; France, 18 per cent; Japan, 22 per cent; Germany, 24 per cent; and Russia, 30 per cent.

Foreign Direct Investment (FDI); $253.5 billion (2012)China leads the world, just ahead of the United States, in FDI, investments made by foreign entities acquiring an interest in local enterprises.

+82% over five years

+78% over ten years

Consumers People who believe brand matters; 51.2%The importance of brand is growing. In the period between 2009 and 2011, the percentage of people throughout China who believe that brand matters and affects how others view them, increased from 45.3 per cent to 51.2 per cent.

GDPAnnual GDP growth over the past decade

GDP per Capita

Rankings

Key facts:

Mobile phones Internet users

Mobile internet users

Key insights:

Senior business leaders in China are not concerned that the target rate of economic growth has slowed. The slowdown has provided a welcome opportunity to review their operations, offering a chance to focus on profit and operational risk management rather than the constant rapid fire response required to keep up with double-digit growth.

Chinese Chairmen are listening carefully to management techniques and approaches coming out of the West, but they are looking to blend these into the ‘Chinese Way’ rather than simply copying them. The goal is a ‘best of the best’ approach to adapt to the ever-changing dynamics of the Chinese marketplace.

Senior business leaders talk about three types of mobility; promotion, location and society. A hierarchy exists but younger managers are given much more responsibility, much sooner than in the West. Businesses are moving away from traditional coastal areas of low cost production towards the interior where major infrastructure projects are changing long-term migration patterns. The increased spending power of the burgeoning middle classes is spreading across a wider geographic area, as urbanisation moves to 2nd tier, 3rd tier and 4th tier cities, generating demand for affordable quality goods and services.

The old way of learning in China, in schools where rote learning has been the tradition, is changing. There is a very interesting area discussed by many Chairmen, which is about encouraging lifelong learning. They are avid readers of philosophy and management books, both Chinese and Western. And they see the need for an education system that provides workers with a much broader and lateral approach to business and thinking, an increased openness to curiosity and experimentation as well as questioning.

A strong message from many Chinese Chairmen is the notion that both reason and instinct have a strong role to play in business and management. The intensity of EQ as well as IQ is very Chinese where the heart also rules decisions, based around philosophical convictions as well as the pure numerical and analytical business rationales.

The explosion of the Internet in China, including e-commerce and mobile, is well documented. The clever use of big data is being exploited in China in amazing ways. Best exemplified by Spring Airlines where over 2.0 million Sina Weibo followers allow the airline to ‘match’ like-minded travellers so they can - if they choose - sit next to passengers with similar interests. This is just one example of how big data is being used effectively by many more businesses to analyse customer behaviours and better tailor business approaches.

The traditional view that the collective is more important than the individual in China is changing. Chinese Chairmen speak of the importance of building strong teams based around the individual and training. There is a heightened focus on building high performance teams with strong leaders. This was developed though a variety of activities - many of which would be regarded as Corporate Social Responsibility (CSR) in the West.

This is much higher on the agenda than expected. Business leaders recognise the challenges of operating under the shadow of ‘Brand China’ but are focused on building trust and loyalty in their goods and services. Creating strong, global brands has leapfrogged the marketing department and is being championed by Chairmen at board level.

Slowdown is welcome

Managing ambiguity is essential to doing business successfully in China. Westerners need to accept that things are often not as they first seem in China; the more ‘clear cut’ culture they might be used to is more nuanced. Working in ‘grey’ requires real insights and lateral thinking.

Grey is good

Copying to blending

Mobility More lateral, less linear

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The Thoughts of Chairmen Now: insights from China’s business leaders