China 2012: Soft Landing Before Regaining Momentum

While 2011 has been overall a good year with little surprises for most companies in China, we are all looking to 2012 with a certain apprehension. The soft landing of the Chinese economy seems to be within reach, but not totally yet, and then there is of course the uncertain global economic environment which might have an impact on China.

InterChina considers that, while the risks to the economy are controllable and manageable for the Chinese government, and while overall consumption is likely to hold up well, some industrial and export-related sectors might be negatively more affected. This more challenging environment will however also provide opportunities to gain market share for those companies who have been strengthening their internal organisation and product portfolio and have really adapted to the requirements of the Chinese markets. Weaker companies, both Chinese and foreign ones, will suffer more now that there is less undifferentiated growth.

Macroeconomic issues aside, the focus of attention for most international companies over the coming year will be more focused on the growth issue in both organic and inorganic ways in the Chinese market. We see opportunities for acquisitions, where Chinese companies might be more open to sell at realistic prices. And the strategic solution to deal with the likely increasing cost structure should move upwards in the priority list of their China’s agenda. International companies should also take this chance to seek efficiency gains, while continuing to pay as much attention to human resources now as before.

In spite of the uncertainties, we see a good year ahead, but only for those companies which are ready for the challenge.

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