Heidrick & Struggles: What China's "New Normal" Means For Multinational Companies

As the global business community adjusts to the new normal, the Chinese economy faces several additional challenges: the continuing weakness in global demand for its exports, rising domestic wages, falling business investment as a result of the rebalancing strategies, sectors with excess capacity, and a softening real estate market.

What does all this mean for multinational companies (MNCs) operating in China? Given the rapid rise of the world's second-largest economy, many MNCs now look to their China operations to lead the way in growth opportunities. However, as the country enters a new phase of more moderate growth, its business environment offers new and more intense challenges across different sectors.

Key findings include:

  • With the new normal comes new opportunities. A vast majority of survey respondents (78%) believe that China's new normal creates fresh opportunities for foreign businesses.
  • However, competition is fierce. Almost 90% of respondents see China as a market characterized by "fierce" competition, with 93% reporting that market conditions have become “increasingly challenging.”
  • Sales growth continues, though at a slower pace. Despite challenges, 82% of respondents confirmed their sales increased in 2014, and 75% expect their sales to increase in 2015.
  • China is a long-term commitment. Organizations with a well-established presence in China report seeing their long-term strategies paying off.

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