The Reality of China’s Economic Growth

I recently completed my third trip through China in the past 11 months.  What has struck me throughout is the level of confidence of Chinese nationals and ex-pats living in country about the nation’s certain economic dominance now and in the future.  And yet, even as I traveled at more than 200 miles per hour on gleaming new rails between Beijing and Shanghai, what struck me is just how far this developing nation has to go to achieve true economic dominance.

Now the obvious answer to my observation is to point out the hugely impressive progress of the past 30 years, the challenge of getting 1.3 billion people into a dynamic economy and the natural fear that westerners have of this rapidly ascending giant.  Yet all of these things ring hollow when taken in the context of attitudes about China’s certain dominance by economists, thought leaders, pundits and business people (not to mention the frantic chattering class of elites, bent on predicting the certain downfall of the US in the near future, if it hasn’t already happened).  

This is not to say I’m not a believer in the might and potential of China, or that I am not impressed by its massive progress in my lifetime.  But I see it’s future value as a market as being much farther away than many predict.  Consider last week’s report in TechCrunch about mobile data revenue.  According to the report, despite there being more than 700 million users of smartphones and tablets, revenues from data and voice lag those of the US and Japan, significantly.  This despite the fact that there are twice as many mobile devices in China as there are people in the US.      

The typical retort is that this is to be expected since the US is a mature market and China is still developing.  That’s true, as far as it goes.  But it misses the larger issue, which is the underlying factors that need to change before China can hope to catch up.  First, the country needs to move rapidly to a more consumption based economy that fosters transactions that drive the kind of revenue growth we see in mobile in the US.  Second, the nation needs to move away from its insularity.  Currently, if you are not a Chinese national, you cannot have a credit card in China.  This slows the ability to spend and to drive the kind of consumer integration vital to the next stages of economic development.  

This lack of dynamism is harmful to the current and next stages of Chinese growth.  Underpinning it is the kind of false confidence that comes from managing hyper growth with tight reigns over three decades.  Eventually, to foster the next wave, the reigns need to be loosened.

As the head of a company with operations in China, I have seen firsthand, the insularity that dictates how companies expand into the market.  Some of my most important clients are leading technology companies with significant operations in China.  And what all share in common is a lack of cohesive operations with the rest of their large markets.  Communications campaigns are handled separately.  Control is entirely local with paper accountability to a global head, but in reality, little actual integration.  This is reflective of a need to dominate, but not be part of a larger whole.

What I frequently hear in response is statistics about the shear number of internet users, the size of airports, the dominant, shiny skylines.  All of this is enormously impressive.  Unfortunately, economic dominance takes more than this kind of scale.  It requires an ability to integrate with the rest of the global market in a deeper way than is presently the case.  It requires a freedom of economic movement not fully in place in China today.  And it requires the faith to loosen the reigns and enable the dynamism that leads to the next level of prosperity.

I would be foolish not to acknowledge the present and future potential of China.  To that end, over the coming year, I will spend time and host salons focused on how to better execute communications and marketing strategies that integrate the market rather than treat it as separate and equal.  And I will watch, with interest, the progress of this vital market relative to what I see as essential to its next leap forward.

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