Economic overview
In the late 1970s, China began government reforms that led to tremendous economic growth. The country phased out collective farms, allowed for more entrepreneurship, lifted some price controls and opened up the country to foreign investment. In addition, the government privatized some state-owned industries. Today, China has the second-largest economy in the world, and its long-term growth outlook is positive. But some analysts are predicting a sharp, short-lived recession in the next few years as the country grapples with continued reforms and what appear to be property bubbles deflate in China’s biggest urban areas.
Some multinationals, like IBM, have reported a significant drop in revenue from Chinese operations. Other companies have pulled out of the market altogether, citing a difficult business climate. Economic growth held steady at 7.7% in 2012 and 2013. In April, the World Bank slightly lowered its 2014 growth forecast for China to 7.6%, based on a “bumpy start to the year.” But the World Bank was upbeat about the long-term potential of government reformsannounced in November, saying they’ll enhance the sustainability of China’s economic growth.
Business travel industry insight
China’s largest airports have doubled in size in the past 10 years, and more airports are under construction. A second international airport in Beijing is four years from completion. China also has 1,695 hotel projects in the works, according to global real estate consulting firm Lodging Econometrics. Hotels and restaurants in larger cities will accept most major credit cards. But credit card use is limited in smaller cities, and ATMs are scarce. Major cities are fairly easy to navigate, even if you do not speak the local language.
Opportunities
- China is likely to benefit from an uptick in international trade as U.S. and some European economies improve.
- The country’s leaders have announced plans to reshape China’s economy so it relies less on real estate and infrastructure investments; capital- and resource-intensive manufacturing; and exports. But progress is slow.
- The Chinese middle class is expanding. Despite an overall economic slowdown, retail sales climbed by 13.1% in the third quarter of last year, and disposable income for urbanites grew
- at 14.1%, according to a report from financial services giant Morgan Stanley.
Challenges
- Overseas firms often struggle with regulations and bureaucracy in China, including the arduous process of getting required business licenses and permits.
- Protecting intellectual property rights is a huge challenge for foreign firms operating in China.
- China’s environmental problems are daunting, and they’re affecting business. Nearly half of 365 foreign companies surveyed by the American Chamber of Commerce in Beijing said concerns over air quality were making it harder to recruit senior executives to work there.
When your business expands into new markets, BCD Travel can get your travelers where they need to be. Talk to your account manager about how we can support your company’s growth across the globe.
