The China Opportunity

There are a number of reasons why any company should have a presence in China, but two of the most important are the large size of the country’s economy and its growth prospects.

Large Size: China is now the second largest economy in the world, following the United States, and almost three times the size of the economy in Japan, which ranks third. In terms of nominal GDP, China’s GDP will likely surpass that of the U.S. by 2020, in terms of purchasing power parity, a measure which some economists use to adjust for currency differences and measures the purchasing power in a country, China’s economy is already larger. Any way it is measured, China’s economy is now one of the largest in the world.

High Growth: While China is no longer growing at double digit rates of growth, the economy is likely to grow by between six and six and one-half percent annually for the balance of this decade.  Even at this lower rate of growth, China’s economy is still growing at twice the rate of growth for the world as a whole and most developed economies. Every year, China contributes over $700 billion, or 30 percent, of growth to the global economy.

Due to the large size and growth of China’s economy, China is now, or soon will be, the largest market for any product or service. As a result, gaining a significant market share in China is likely to translate into success globally. By implementing a well-thought-out strategy in the largest market in the world, every company has an opportunity to become tomorrow’s global leader.

This is especially true because, despite its size, China’s economy is still in an embryonic stage of development, with many product, technology and service “gaps” needing to be filled. Much of China’s economic growth to date has been based on the manufacture of relatively low value-added products for export and the country’s evolution as the “workshop for the world.” In the years ahead, China’s manufacturers will focus on producing higher value-added products that require access to the best technology from around the world. Large industries such as health care, banking and financial services lag the country’s development in manufacturing and are in need of upgrading. New and innovative solutions must be found to pressing problems such as the environment, and China’s increasing wealth is creating new opportunities in the services sector.