September 4, 2012
For association executives working in international environments, it is critical to understand the background of the countries where you consider marketing services, opening offices or establishing government relations. For more on understanding global context, read our recent post on Hong Kong. Headlines in the U.S. have focused on the Republican and Democratic conventions, but another potential leadership change is taking place on the other side of the globe. In the People’s Republic of China, upcoming elections for the new President, Premier, member of the Standing Committee in the Communist Party may have a significant impact on how China moves ahead in the next ten years. The new leadership could cause a shift in economic focus as well as in foreign affairs and trade policies. It’s important for association executives operating in China to understand the economic background in China. In previous years, there were many upsides to setting up businesses there. While the business risks are not necessarily increasing, there are changes that may have an impact. In the last quarter China has seen a shift in some economic factors, including:
- Slowing inflation and lower GDP growth: although still 7.5 % and envy of the world.
- Minor depreciation of China’s currency, the Renminbi (RMB) against the US Dollar: this has not happened in many years
- More capital leaving than Foreign Direct Investment coming into China
Despite a slowdown, no hard landing is anticipated and China remains a juggernaut and very important market, where domestic consumption will continue to grow fast. There are several sectors that are seeing positive changes, including travel and services (including consulting, financial, quality control). China’s advantages as a low wage country have become less important (less competitive) in the past decade. Consequently, its job market is moving up the value chain both in salary and in expectations for good living standards and consumption as China has shifted its focus on domestic growth via more consumer spending. China is increasingly active in fields of food safety, pharmaceuticals development and containment of hazardous materials. This activity is in part in response to citizens’ and netizens’ criticism, but is also aimed at promoting green technology industries and improving the quality of life in China. Chinese lawmakers and regulators are stepping up standards that deal with safety and quality control. At the same time, they have also become more active in international regulatory bodies such as Codex Alimentarius (international food law). Building and maintaining government relations are crucial for being successful for China. There are several other changes brewing in China which might change the landscape there in the next few years:
- Much rule making is on the table as a result of the new leadership tackling the issues proposed in the latest 5-year plan (approved in 2011)
- China’s influence and power is increasing and impacting policies of other nations in Asia and worldwide
- Policy migration, for example on health & safety, causes rules to move from one to the other major regions or countries hence every association needs to tap into companies like Kellen for a good insight in changing legislation and regulation in China
With an office in Beijing, Kellen Company works in the changing business environment in China every day. It remains to be seen how upcoming changes will affect business and associations based there, but it’s an exciting time to be in China. Does your association have an office in China? What trends or changes do you think will impact foreign businesses there?