This is the first of a series of analysis looking at three important but common misperceptions about China that can lead decision makers to develop strategies that will not be most suitable for their organizations:
- Slowing growth makes China a less attractive opportunity than previously (or than other emerging markets)
- Rising labor costs marks the end of low production costs in China
- China copies intellectual property and will not turn into a scientific and technological power
Following our previous Analysis from July, with findings unmistakably pointing to increasingly profitable results of European companies in China over the years, we find it worthwhile to take a look at the Chinese market and its potential for the coming decade.
While in percentage China’s GDP growth went down from an average of 10.4% a year from 2000 to 2010, the average growth rate of 7.9% for the 2010-2020 decade2 still means that China will add USD 6 trillion to its GDP this decade. That is 50% more than the USD 4 trillion in GDP added during the previous decade!
China’s growth is only slowing down in percentage. In amount of dollars, China is in fact adding more GDP to its economy every year than it ever did in the past. This is simply due to the size that the economy has reached in the past year, making a slower percentage growth still a bigger amount in absolute numbers. For business, absolute numbers, not the percentage, are those that really count. Mongolia, for example, may grow 15% in 2012, but with a USD 6 Bio. GDP, the business opportunities remain limited. This level of growth means that, by 2020, the Chinese GDP will account for 19% of the world’s economic output, compared with 9% in 2010, potentially closing the gap with the United States.