China gains market strength with a growing focus on quality

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In a recent episode of TDAmeritrade Network’s “Morning Trade Live,” China expert Tom Manning, independent director of Dun & Bradstreet and former CEO of Cerberus Asia, Indachin Limited, Capgemini Asia, and Ernst & Young Global Consulting Asia, spoke about the growing strength and maturity of Chinese commerce and its role in the global economy.

The biggest news over the past few weeks out of China are the slowing of the world’s second-largest economy’s key economic indicators, seen as the country looks to bring down borrowing costs.

A calming force in China comes as the Chinese Party Congress concluded in October and established leadership for the next five years, locking down policies for the foreseeable future. According to Manning, “What we’re seeing is an economy that is increasingly focused on quality growth. In the past, growth has been fast, but not necessarily high quality. There has been a lot of waste in terms of the environment, a lot of extra expenditure, over-capacity building and the like, and we’re going to see that change.”

Manning predicts China’s next phase will have a greater focus on quality – an important move as China works towards growing its industrial base. This focus is important too not only as a practical matter, but as a matter of perception – many American competitors dramatically underestimate the strength of their Chinese counterparts, still mistakenly believing that Chinese manufacturing is still dominated by low-cost commodity manufacturing and cheap copies of high-quality American goods. While that may have been the case once, it certainly is no longer.

On the TDAmeritrade show, host Joe Renick talked about the idea of quality growth in China, and how the country has been a strong creator of demand, with phenomenal growth numbers. In China’s next phase, some elements of that growth will be sacrificed towards a quality goal that delivers more sustainable, longer-term growth.

“Every industry will be impacted by Chinese economic policy,” said Manning. The country already has global leaders in several areas including telecommunications, computers, and software – and the country’s economy is becoming more balanced internally.

As China’s economy matures, its industry will mature as well – and as Manning notes, this will be good not only for China, but for American manufacturers and exporters. The government has also been moving towards their commitments to WTO, to liberalizing their economy, and opening the door to investment, as seen in the recent announcement permitting more investment in financial institutions.

As China’s economy grows, the country’s middle class is growing, and Chinese consumers are spending more on themselves, with this trend helping further enhance the country’s growth and balance it so that it is not exclusively focused on export.

The November report on China showed industrial output climbing 6.1 percent year-over-year, retail sales rising 10.2 percent, and fixed-asset investment up 7.2 percent in 2017.

The growth in China is important for American companies to watch, especially as companies like Alibaba leverage Chinese consumer demand to take increasing share and compete against American powerhouses like Amazon. “The era of easy growth for American multinationals and foreign multinationals in general in China is over,” said Manning. “Growth from now on becomes more complicated. Because frankly, Chinese competitors are just more skilled.

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