The China Business Watch List for 2010
December 31st, 2009 by AdministratorKeys to Growth in China – New Cities, M & A, Distribution
Raleigh, NC – December 31, 2009 — China will provide necessary growth for US companies in 2010. Kent Kedl, managing director of Technomic Asia in Shanghai, says there are five opportunity signs for companies to watch in China this year. Kedl highlights those areas below:
· Growth – The World Bank projects a robust GDP for China following an anticipated 8 percent growth in 2009. There will be few places in the world with this kind of growth.
· Distribution – Companies who are in China already need to find a better way to get their products to market. It is the classic case of getting products to market, which requires a transportation infrastructure and integrated supply-chains. The Chinese government stimulus and other programs are addressing infrastructure needs. The last two decades of manufacturing investment and export experience within China make this country keenly attuned to the benefits of integrated supply-chains. US companies are becoming familiar with cities like Dalian, Chongqing, and Hangzhou as well as 40 others as those areas approach double digit annual growth over the next several years.
· Consolidation – The majority of China’s industrial sectors are over-crowded and too fragmented. As the market matures and distribution consolidates, the companies themselves will consolidate. Look for this to happen in automotive, primary metals (particularly steel and aluminum), consumer products (food and beverage, mid-range body care, all ranges of homecare).
· Mergers and Acquisitions – A separate and complex strategy unto itself is divided into two major categories, 1) into China and 2) out of China.
o Into China – Foreign companies need speed-to-market, and M&A is the best way to achieve coverage and market share.
o Out of China – This is still in the very early stages but we should see some mid-level deals done by Chinese companies overseas (not only the big energy deals).
· China’s Global Influence – China is emerging as a leader as the dust settles on the global economic crisis. Politics aside, China will continue to expand its shoulders upon which the rest of the globe will build their own economies.
Key Sectors to Watch in China
Kedl believes there are several key industrial sectors to watch in 2010 in China. They include: 1) Medical, particularly healthcare services, look for the privatization of hospitals, 2) Automotive, consolidation of OEMs, growing strength of dealers and dealer groups, stronger aftermarket parts distribution, and 3) Consumer products, particularly in the 2nd and 3rd tier cities.
Technomic Asia conducts primary and secondary research in China markets for Fortune 100 and midsize companies. Kedl was also deeply involved in a recent 2009 China Business survey done for the American Chamber of Commerce in Shanghai. According to Kedl, “This survey showed that even companies who are in China for 10 years need to reassess how they approach China because the country has changed from a provider of low cost production to a growth consumer market.”
In addition to research, Technomic Asia uses their research to assist companies develop strategies to participate in China markets and sourcing.
The China Business Podcast, hosted by Kent Kedl, will focus in greater detail on these growth areas in upcoming episodes in January, 2010. Listen to them at iTunes, Stitcher Radio, or at www.technnomicasia.com/blog. Here is the first podcast with an overview of these business opportunities to watch in 2010 in China.
About Technomic Asia
Technomic Asia, the Asian arm of Tompkins International, is a strategic consultancy with more than 25 years of experience helping clients plan and execute Asian growth strategies. Technomic Asia assists companies in entering the Asian market or in expanding their business by providing critical market insight, an understanding of business potential and assistance in designing the optimum strategy for success including M & A. Technomic Asia’s Steven Ganster and Kent Kedl are co-authors of “The China Ready Company,” a book that details the formation of a successful China strategy.
