Multinational companies should take advantage of significant opportunities existing in the Chinese market and address challenges, said global consulting firm McKinsey in a report. China’s economic and market size is too large for many multinational companies to ignore, wrote McKinsey experts. China’s GDP may grow between 2% and 5% annually over the next 10 years, depending on which scenarios prove accurate. Even under the 2% forecast, China’s additional GDP over the 2021-30 period will be larger than India’s total GDP in 2021. If 5% growth is realized, China’s additional GDP will be as large as India, Japan and Indonesia combined in 2021. “As global investors and corporations look for growth, everyone is wondering “Where is the next China?”. Our view is that if you are looking for growth, the answer is simple – the next China is China,” said Joe Ngai, Chairman of McKinsey Greater China. China’s continued urbanization and expansion of the middle-income group offer opportunities for multinational companies in bio-pharmaceuticals, consumer health and entertainment. Meanwhile, China’s industrial transition will present multinational companies with opportunities in power, agriculture, transportation and construction, said the report.
Multinational companies in industries such as cars, luxury goods and industrial equipment should by no means overlook the Chinese market, which already represents 25% to 40% of their global revenues, according to McKinsey. It should also be noted that China is becoming a global major in innovation, especially in artificial intelligence (AI), advanced connectivity and space technology, McKinsey experts said. Domestic companies have been making huge progress in technological innovation. Between 2017 and 2021, research and development (R&D) spending made by the largest 136 technology companies measured by market cap grew three times as quickly as that of the 129 Fortune 500 companies disclosing comparable data. Most Chinese companies’ R&D expenditure has been directed to next-generation products and services, according to the report.
In a 2021 McKinsey study surveying executives at local and multinational companies, 62% of respondents called China’s development environment and capability already at least as good as those at the best global development centers, or likely to be in five years. “As Chinese companies grow, more and more are competing regionally and globally. Multinational companies will have to make bold changes in how they operate,” Nick Leung, Senior Partner of McKinsey & Co. said. Kweilin Ellingrud, McKinsey Senior Partner and Director of the McKinsey Global Institute, also suggests that multinational companies keep a close eye on China’s policies regarding sustainability, technology and income distribution, the China Daily reports.
