BIZCHINA / Biz Who
China is good long term bet
By Liu Baijia (China Daily)
Updated: 2006-11-24 08:55
Foreign companies should think about what China is going to be like in
2020 to tap its future growth, rather than make decisions based on the
status quo, said an influential management consultant.
Paul Laudicina, managing officer and chairman of the board with the US
management consultancy A.T. Kearney, said by 2020 the world will add 1
billion people with an annual purchasing power parity of US$10,000. That
will mean a middle class of 2.3 billion people, 31 per cent of the
world's total population.
profile: Paul Laudicina is Managing Officer and Chairman of the Board at
A.T. Kearney. He is the seventh person to lead the firm in its 80-year
history.
Paul joined the firm in 1991 and was the founder and chairman of A.T.
Kearney's Global Business Policy Council, which is among the consulting
industry's longest-standing strategic services for CEOs. He has more than
25 years of global consulting and management experience in industry,
government and research institutions.
Out of the 1 billion new middle class spenders, 90 per cent will be from
developing countries, 620 million of which will be Chinese.
"That's why you have the volume of foreign direct investment (FDI)
increasing here, because China is going to become the world's biggest
market, not just the world's biggest factory," said Laudicina, who was
selected by Consulting Magazine as one of the world's 20 most influential
consultants last year.
China has ranked No 1 on A.T. Kearney's Foreign Direct Investment
Confidence Index since 2002, and its score reached a record high of
2.1917 on a scale from 0 to 3 in 2005.
"You cannot operate successfully unless you are prepared to change with
the environment," said Laudicina on his first trip to China after being
elected as chairman and managing officer of the consultancy in September.
One way to do that is to see what challenges the country has and help it
address those issues, he said.
China, which has grown into the world's fourth largest economy mainly due
to explosive development in the manufacturing industry, faces challenges
of rising labour costs, shortage of resources, and an environmental
bottleneck. Growth in service industries and enlargement of the number of
affluent people are keys for China to achieve sustained growth in the
coming years.
From 1985, while the world's manufacturing jobs declined 11 per cent,
China's fell by 15 per cent, due to technological innovations, Laudicina
noted.
For many multinationals, China is made up of two radically different
markets: In eastern coastal regions, it is as developed as some mature
markets; in rural and inland regions, it is more of a typical emerging
market.
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