Written by David McDonald, Quora
To make sense of China’s next decade, it is critical to grasp that there is no single driver of the nation’s future. Instead, four very different drivers are pushing the country forward at once, all powerful, and all interacting with each other in unanticipated ways.
The first driver is an aspect of the country’s economy and culture that I call “Open China.” The emerging potential of China’s consumer markets is well known to outside producers, many of which, like General Motors, have already come to depend on these markets for their profitability. Unlike other leading economies in Asia, including Japan and South Korea, China began opening its markets to foreign companies at the very start of its economic reforms and it has opened them ever wider ever since.
At the same time, the Chinese people have rapidly advanced as consumers; the wealth created by China’s growth has created a substantial middle class. Putting a precise number on the size of this segment of the population remains tricky, but however large it is, China’s current middle class is a mere fraction of what it will become as hundreds of millions more people join its ranks during the next decade.
After this honeymoon phase, the Chinese mass market will morph into a vast, highly differentiated and sophisticated multi-tiered consumer economy capable of driving growth for Chinese and global businesses alike. This growth trajectory represents a powerful short-term opportunity for major non-Chinese companies (for example, in helping to develop the retail sector of this nation) and a daunting long-term challenge in terms of maintaining market share.
The second driver is “Competitive China.” Hundreds of thousands of new Chinese companies have made this country the world’s most competitive business environment. Indeed, China is now the world’s largest and fastest-growing source of entrepreneurial start-ups. It is also an incubator for large businesses, both foreign and home-grown. Nearly 300,000 foreign-invested businesses have been established in China, vying to tap into the country’s manufacturing base and reach its consumer and business markets.
The third driving force is “Official China”: the shifting direction and role of the government and Communist Party. The government has managed the liberalization of many parts of the economy, but it has maintained control over its strategic heights by retaining ownership of the core group of state-owned enterprises in the finance, communications, energy, resources and media sectors.
Contrary to the hopes of many foreign investors, Official China has no intention of letting go of these companies, and it will maintain tight control over those parts of the economy that it wishes to manage. But as it faces the challenges of internal complexity and external engagement, it will evolve toward a nondemocratic but market-driven form of rule that, arguably, has never been seen on the world stage before.
The fourth driving force is the existence of “One World” with which China, like all other countries, is interdependent as never before. Globally connected power, communications and transportation links now exist almost everywhere in China.
The nature of “one world” and the open, entrepreneurial qualities of China will reinforce each other in unexpected ways. Goods developed there will be marketed to the rest of the world. Chinese companies, meanwhile, will increasingly go abroad to find new sources of technology and business skills, particularly for innovation, brand building and access to international finance.
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