A Tsunami of Change: Riding Waves of Growth



By Michael Barbalas, PRI Senior Consultant


When a tsunami is unleashed, it reshapes coastal areas with destructive power. Since the start of Covid-19, companies have experienced the tsunami effect of the global pandemic in wave after wave of disruptions and new challenges to their business. While Covid-19 has been in the headlines, there are other ongoing macro trends that continue to reshape the business environment – AI, digitization, decoupling, climate change.


In this changing environment a company’s strategy should not be a static relic filed away on a bookshelf. Companies that do not regularly re-evaluate their strategy find themselves out of step with markets and emerging opportunities. This is the time to re-align your company’s China strategy with the growth drivers in China. Growth opportunities in China tend to come in waves driven by government economic development priorities and the ongoing economic development.


In recent months, China’s leaders have been promoting the “Dual Circulation” (双循环) strategy for China’s overall economic development. This strategy was also a major component of the 14th Five Year Plan announced in March 2021. The dual circulation refers to both developing the domestic oriented part of China’s economy as well as deepening China’s integration with the global economy. In promoting dual circulation, China’s economic planners are striving to greatly increase domestic consumption along with increases in innovation and deepening of domestic supply chains. For example, more than one third of European companies selling into consumer markets in China saw a greater than 20% increase in revenue during the past year. At the same time, China is also trying to further increase its trade and investment links with the rest of the world.


Since mid-2020, China’s economy has continued to rebound and lead in growth. For example, the Singles Day online sales in November 2020 exceeded $75 billion, which is four times the size of the biggest shopping days in the USA on Black Friday and Cyber Monday. During the 2021 May 1st holiday, 230 million trips were made, an increase of 3.2% over pre-pandemic levels and more than double the 2020 numbers. When surveyed about future prospects, American Chamber of Commerce in China members were optimistic about growth and profit potentials over the near term, as seen in the chart below.



In each of these indicators, more than 50% and as much of 75% of companies are optimistic in their business outlook.


In announcing the 14th Five Year Plan (2021-2025) earlier this year, China laid out near-term goals as well as mid-term goals through 2035. Having a level of transparency about China’s longer-term goals and objectives allows companies to better align their own corporate strategies with macro plans of the Chinese government.


The biggest challenges we hear from companies that keeps them from addressing the strategic challenges and opportunities presented by China are the current international travel restrictions. Many companies feel cut off from China because of these Covid-19 related restrictions. However, this does not mean that companies can afford to put their China strategy on hold and wait for future travel relaxation. One of the best initiatives in 2021 is to take a fresh look at how your company can best position itself to benefit from the current and future waves of growth that China offers. As the global market providing the largest amount of potential growth, China is not a market you can afford to ignore.


Given the many changes that have accumulated in recent years and the tsunami effect of the global pandemic, a fresh look at your company strategy is overdue. The current restrictions on international travel should not be an excuse for delaying critical strategic decisions. Companies do not need more information but rather an experienced partner on the ground in China who can walk with them through the mountains of data and provide objective third-party analysis, guidance and validation to help them reach their objectives and take advantage of the waves of growth.


About PRI: PRI Management and Consulting helps companies thrive in China because we think like owners. With offices in each of China’s major economic super-regions, we help you develop growth strategies, hire and administer some of the world's best engineering talent, build your supply chains and sell your products and services to the world's fastest growing and biggest market.


To schedule your free consultation with PRI’s experienced team of consultants and managers, write to Jonathan Kendrick at jonathan.kendrick@priusa.com


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