AsChina's top leaders prepare to discuss major policies on the country's reform agenda during the upcoming Third Plenary Session of the 18th Communist Party of China's Central Committee in November 2013, the rest of the world is keeping a close eye on General Secretary Xi Jinping for any clues as to the policy direction ofChina's new leadership.Kobus van der Wath, founder & Group Managing Director of The Beijing Axis, believes that the rest of 2013 and 2014 is going to be a period of great change for companies in many sectors. Excerpts of his thoughts follow:
China'stop leaders are well aware of the problems facing the world's second largest economy and followers are cautiously optimistic that the new leadership will push through long anticipated reforms needed to ensureChinacontinues on its long-term growth trajectory.
Some of the new (old) ideas to manage imbalances throughout Chinese society include: privatizing rural land to boost rural incomes and encourage migration to cities; refining the family planning policy to ensure the country has an adequate labor supply to offset a rapidly aging population; and reforming thehukouhousehold registration system to give migrant workers and their children equal access to urban facilities.
From an economic perspective,China's new leaders must continue to stabilize the economy to keep employment high while avoiding a surge in housing prices and inflation that could undermine reforms needed to overhaul the country's investment and export-oriented growth model. Environmental protection, food safety and public health are high on the young administration's agenda as a richer, larger and healthier middle class in China would not only help to stimulate domestic consumption but also demand more from the future.
The changes taking place inChinaare worthy of their own story. One of the major issues to watch will be the success (or failure) of Chinese and other emerging-country firms in cracking into developed markets. The fruits of globalization will no longer largely accrue to rich-world businesses as emerging-market products and services win consumers in the West. In the coming years, Chinese car manufacturers will continue their efforts to break into European markets, while Chinese real estate developers, construction and Internet firms look to diversify their asset portfolios into more stable but still revenue-generating economies.
Against this backdrop, manufacturing will be undergoing a revolution. Rising Chinese wages will prompt some domestic and foreign-owned factories to look for more cost-competitive locations - in some instances back home, but more often to places such asBangladeshorMexico. Others will have to reinvent themselves.
The stakes are equally high for resource-endowed countries such asAustraliaas their economies remain heavily dependent onChina, with most maintaining a relatively long-term bullish view aboutChina's future demand for commodities.China's gradual shift from heavy infrastructure construction to a more domestic consumption oriented growth model is understandably changing the strategic planning of global miners.
Chinese Premier Li Keqiang advocates further urbanization, which could put more money in the pockets ofChina's migrants to spend on cars, televisions, appliances and real estate to fulfill their aspirations of joiningChina's middle class ranks.
Put these themes together, and it is clear that the rest of 2013 and 2014 is going to be a period of great change for companies in many sectors. But in that change lies opportunity, and the better the businesses' knowledge of the environment in which they will be operating, the more likely they are to succeed.
