Young Chinese children dressed up as U.S. fastfood chain Kentucky Fried Chicken's Colonel Sanders ... [+]
It was a mixed bag for China on the 2024 Forbes Billionaires List unveiled last week. The country continued to rank No. 2 in the world as home to the largest number of billionaires, but their ranks thinned to 406 members from 495 last year and a record 626 in 2021.
What’s next for entrepreneurs and businesses in China – domestic and foreign? At least eight obstacles cloud the future, says Cameron Johnson, a two-decade American expatriate businessman in Shanghai, a senior partner at consulting firm Tidal Wave Solutions, and adjunct faculty member at NYU Shanghai. “The prevailing sentiment,” Johnson said in an email exchange, “can be summarized as a pervasive lack of confidence coupled with an increasingly challenging business environment.”
Here's Johnson’s list:
*Weak confidence, economic uncertainty. Economic growth topped 5% last year, according to government figures. While better than much of the world, that was below China’s pre-Covid performance and casts a shadow over business prospects, Johnson said. “The government’s hesitance and limitations in stimulating growth add to the unease,” he said. “The struggling property sector and unmet domestic demand are further dampening entrepreneurial forces,” as well as domestic consumer confidence and spending, Johnson said. “Employment uncertainty, negative wealth effects from property and stock markets, and fiscal woes add to the mix.”
*Lack of transparency. “A general lack of transparency in laws and regulations leaves entrepreneurs guessing,” Johnson said. “Stringent laws in specific areas—such as cross-border data and national security—add to the complexity.”
*Policy roadmap is unclear. Companies – foreign and local alike — are grappling with understanding the policy roadmap for the next 10-20 years, Johnson said. “While past decades saw infrastructure and consumer-focused roadmaps in areas such as real estate, exports, manufacturing, KFC, Disney and travel, today’s path remains unclear. For foreign firms, the challenge lies in identifying areas to localize, especially those critical to China’s national security — think semiconductors and smartphones,” he said.
*Geopolitical quandaries. “What began as a ‘U.S. issue’ starting with the launch in 2018 of the ‘trade war’ has morphed into a global challenge on almost every continent,” Johnson says. Chinese firms such as TikTok and CATL are facing pushback in the U.S.; anticipate European tariffs and restrictions, and constraints from Asian suppliers in key industries, Johnson advised. Facing today’s geopolitics, “Foreign firms are grappling with de-prioritization from their headquarters and shifting benefits of operating in China,” he said. “Foreign firms also face challenges in procurement and services with a preference for local/domestic goods versus foreign ones, even if the products and services are made in China.”
Cameron Johnson is a two-decade American expatriate businessman in Shanghai, a senior partner at ... [+]
*Fierce domestic competition. “The buzzwords—overcapacity and aggressive pricing—echo across industries,” Johnson said. “Electric vehicles exemplify the cutthroat market dynamics, with frequent price adjustments and rapidly evolving market trends. Lesser-known battles rage in many markets, however, such as the coffee market, where Shanghai’s more than 7,000 coffee shops vie for supremacy and the competition for customers is some of the fiercest on the planet.”
*Talent challenges. “Expats exiting the last several years have slowed some R&D and product development,” Johnson said. “Youth unemployment can be a challenge in certain industries, with many not being trained or having the work experience of the previous generation. Blue-collar roles requiring specialized skills are becoming increasingly difficult to fill, especially in advanced manufacturing. “
*Financial hurdles. “Large state-owned enterprises secure financing with ease,” and larger private firms have been able to find avenues, John said. “But for smaller private enterprises, accessing affordable financing remains a near-impossible feat.”
*High social welfare costs. “Social insurance expenses—averaging 30-40% of an employee’s salary—weigh heavily on company finances and commitments,” Johnson noted.
“In this complicated landscape,” Johnson concluded, “entrepreneurs need to balance caution with strategic foresight. The road ahead remains uncertain, but adaptability and resilience are some of the best assets in this type of environment.”
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