Fortune speakers seek opportunities in China's transformation
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E-mail Xinhua, June 7, 2013
Shifts in China's economic structure, particularly its urbanization drive, will provide opportunities for the rest of the world, speakers told the 2013 Fortune Global Forum.
In a discussion to analyze China's economic reform on Friday, Dominic Barton, global managing director of McKinsey & Company, told the forum that urbanization is an underlying force of growth for China, which has almost been uninterrupted by external economic uncertainties.
Barton said the country has an urbanization rate of about 52 percent, suggesting a large amount of room for further increase. According to his estimate, 250 Chinese cities by 2025 will contribute 29 percent of the world's total economic growth.
A growing middle-class population means a shift of strategy for multinational corporations tapping in to the Chinese market.
"Chinese consumers are becoming much more discriminating and demanding," Alex Gorsky, chief executive officer of Johnson & Johnson, told the forum.
Gorsky stressed that companies need to truly understand what the Chinese market needs in order to be competitive.
Despite the positive outlook, Henry Paulson Jr., former Secretary of the Treasury of the United States, said problems remain in energy inefficiency and pollution when it comes to urbanization in China.
Also, migrants still lack health care, social services and education compared with city dwellers, leading to problems as well as opportunities, Paulson told the audience.
His comment was echoed by Gorsky, who estimated that the Chinese population over 65 years old will surpass the number of people in the United States soon, a group that tend to consume five times as much health care than when they were younger.
Companies need to innovate in accordance with the aging Chinese, not just copy systems used in the United States or Europe, according to Gorsky.
Opportunities China could bring to the rest of the world as it shifts towards a consumption-led and services-led economy are under the spotlight at the forum, being held from June 6 to 8 at Chengdu, capital of southwest China's Sichuan Province.
Stephen Roach, economist and former chairman of Morgan Stanley Asia, told Xinhua Thursday that China's consumption and service sectors as a portion of GDP are still far below those of other major economies, creating a large opportunity for the country's major trade partners.
He said there could be growth of 5 to 6 trillion U.S. dollars in the country's tradeable services sector from now until 2025.
China is aware of its potential new growth engine.
Chinese Premier Li Keqiang recently vowed to speed up growth in the country's service sector and boost service trade to address growing domestic demand, create jobs and optimize the economic structure.
But Cai Hongbin, dean of Guanghua School of Management at Peking University, said it takes time for transformations within such a large-scale economy.
While acknowledging that the Chinese government has made a "correct diagnosis" of its economy, Paulson emphasized that the scope and timing of reforms are also important.
The former U.S. official expected financial reform to come first, as it is essential for all other reforms to happen.
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