The press consistently discusses the slowdown in China. This is real, but GDP growth is still double that of the best performing western nations. China is predicted to overtake the US as the world’s largest economy 20 years from now, so the long term opportunity for multinational companies (MNCs) is clearly still strong. But some things have changed.
A long overdue crackdown on corruption has resulted in MNCs becoming more cautious to ensure they will not have any compliance issues, argues Mark Braithwaite, Odgers Berndtson’s Managing Director, Asia Pacific.
“This is a serious reality for Chinese as well as for foreign companies.
It has brought caution and contributed to the slowing growth, but is an essential part of China’s evolution and reform on their trajectory to being the world’s largest economy,” he says. “This change ultimately helps MNCs as it helps level the playing field.”
A big push for ‘returnees’
Every MNC cites talent as their biggest challenge in China.
Says Braithwaite: “Over recent years MNCs have had a big push for hiring ‘returnees’ in leadership positions – Chinese executives who have lived and worked overseas, bringing an ability to work seamlessly in a western company, while bridging the gap to the local team.” These people are of limited supply and salary levels have risen to a point that most MNCs are finding it hard to accept, but end up paying anyway.
The second leadership issue MNCs are talking about is that most local Chinese executives have only known the hyper-growth of the last 20 years and are now faced with a tougher market, rising competition and demand for productivity against a backdrop of lower growth.
“There is a new set of demands in terms of the skill sets companies need and the experience is often lacking.
Suddenly the demands are different and we are going through a period of adaptation,” adds Braithwaite.
Smart, driven young people
Braithwaite sees light at the end of the tunnel on China’s leadership talent problem.
“China has a huge supply of smart, driven young people. They are much more international in their outlook and experience than previous generations. I will go out on a limb here and predict that, when the current middle managers in their 20s and 30s have another 10 years’ of experience under their belts, China will be a leadership powerhouse.”
For MNCs, the challenge is to attract and keep these people, because Chinese businesses are now attractive places to work.
We will see more and more of them become global companies, with strong, capable, locally grown leadership.
In the world of business, China is quickly chasing down the developed world.
Through all of the economic reform and talent constraints that face MNCs in China, many are booming and reporting double digit growth, while others are in the midst of transformation projects as they focus on productivity to address a stalled top line. We live in interesting times.
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