Why most business leaders are blind to China's vast future impact on our world

By 2040 China will dominate almost all global markets 

China already has the world’s largest banking assets of $42 trillion, and China is the world’s largest economy when measured by Purchasing Power Parity, which takes into account how much the same basic items cost in each nation.

China is the world's largest manufacturer, the largest exporter, the fastest growing consumer market.

China is the world leader in digital innovation, high-speed rail and green tech.

China generates 40% of all global e-commerce transactions, and files more patents than any other nation. 

Mandarin is the most common first language spoken by 800 million web users, and China is the world’s largest e-commerce market with 40% of global share. 

Chinese people will spend which $1.8 trillion online by 2022. 

Alibaba is the largest online retailer in China, with revenues growing by around 50% a year, over $40bn in 2018, (compared to $180bn for Amazon), with 600 million registered accounts and 100 million e-commerce shoppers every day, representing 60% of all China’s e-commerce.

(Extract from New edition of my latest book The Future of Almost Everything with new chapter on life in the year 2120)

Most business leaders don't realise how dominant China will be

Yet despite all this, a shocking number of business leaders talk down China’s capabilities, and are out of touch with reality. Same for many government leaders. They just don't understand what is going to hit them.

China’s economy will be three times the size of India’s in 2025, as it is today, but we can expect that India will close that gap in the longer term.

China is a ‘nation of nations’ with eight languages, a huge middle class, and one of the best educated workforces in the world. China is evolving rapidly towards a fully “developed” nation, and for many globalised corporations, manufacturing in China is already an old-fashioned idea, because wages are becoming so expensive.

Transition from export-led manufacturing to more balanced economy

By 2025, China’s consumer market will be three times larger than Japan’s.

The consumer revolution in China will all be part of a transition from an export-led, manufacturing economyin China to a more balanced economy serving Chinese consumers. 

As a direct consequence, global trade in the Renminbi (RMB) will rise. It has already overtaken the Euro as the world’s second most important currency for trade after the dollar.

Expect consumer spending in China to continue to grow by 7% on average each year for the next 15 years, with occasional dips in the adjustment process. 

Government in China will continue to be strong, centralised and visionary

President Xi Jinping is the most powerful leader that China has seen since Chairman Mao, with popular agendas such as stamping out corruption, breaking up state monopolies, faster economic reform, greater equality and developing China into the world’s most powerful nation. 

He will run China strongly and efficiently, to a grand master plan with bold, visionary investments for China’s future, also respecting ancient Chinese philosophy.

Expect many more bold decisions which will impact global markets. 

China’s leadership will do all it can to maintain economic growth above 5–6% a year for the next two decades, to satisfy aspirations of the people, and reduce risk of civil unrest. 

While 5-6% will be a hard target to achieve, year on year, overall, the government is likely to succeed in delivering stable growth, steady improvements in standards of living. 

The memory of revolution is recent, strong and unsettling and every effort will be made to ensure social stability. Every adult in China aged 65 today has vivid memories of life as a young adult under the Red Guards and the Cultural Revolution led by Chairman Mao.

The workforce in China will continue to migrate to large cities

As we have seen, at least 300 million more Chinese people will migrate to cities over the next 25 years, from poorer locations, seeking better lives, providing extra labour to compensate for the ageing workforce. 

A further 600 million middle-class people will expect better lifestyles, more personal freedoms, and will be increasingly strong in their private opinions about how their region should be governed, about pollution and corruption, size of their families or future well-being of their children. 

For example, social media stories about contamination of rice led to consumer boycotts, and huge purchases of European powdered milk and baby food. The government restricted imports, but tens of millions continued to get relatives and friends abroad to send supplies, creating huge logistical and supply issues in Europe.

The Coronavirus SARS-CoV-1 in 2020 created another crisis, not only health and economic, but also social and political.

Expect China to further develop its own form of democracy, allowing regional voting for candidates with different policies, even if technically as part of a one-party state, within the limits of national policy.

One of China's greatest long term challenges will be low birth rate

China will continue to age as a society because of the one-child policy. 

Shortage of younger Chinese workers has been partly hidden by migration from rural areas. 

An additional challenge for China is that many families over the last 30 years have chosen to have a boy as a single child – either by selective abortion or in some cases infanticide. 

There is now a significant gender imbalance – 50 million women may be ‘missing’. More Chinese men will look for a lifelong match with someone born outside China, using dating agencies and other means.

China will relax further its one-child policy, worried about the falling population of working age. Birth rates have risen 8% in a couple of years, but that will not be enough to supply all the workers China will need.

More regionalisation within China

There is more than one China: culture, tastes and fashions vary hugely from one part of the country to another, together with what is permitted locally. Over 400 million people do not speak Mandarin. 

Expect large companies to decentralise decision-making within China rather than concentrate leadership in a city like Shanghai or Beijing. Expect more localised product development, branding and marketing.

Freedom of speech, freedom of movement, freedom of religion and fertility 

As we have seen, Chinese is already the dominant language of the web, and many of the world’s greatest online companies over the next two decades will be born in China – now the centre of global, digital innovation. 

Expect the government to continue to walk a narrow line between embracing the freedoms of the virtual world and wanting to control it.

Senior government leaders recognise that major unrest could be triggered not only by lack of jobs and lower economic growth but also by anger over inefficiency, corruption, inflation, inequality, pollution, over-zealous censorship and lack of religious freedom. 

The government also fears wider contagion from regional unrest in places like Xinjiang, among Muslim Uighars, and also in Tibet.

Expect huge growth in security technology such as face recognition and tracking movement of citizens as well as monitoring communications. This will be further accelerated following the national emergency over Coronavirus in 2020, which resulted in rapid deployment of mobile Apps which informed citizens if they had been in close contact with other carriers of the virus.

Stamping out official Chinese corruption

Expect many tens of thousands more arrests for corruption in this vast nation, following aggressive anti-corruption drives by the senior leadership. 

Many global suppliers of premium retail such as watches, perfumes and hotels have already been hit by an absolute ban on expensive business gifts and extravagant lifestyles by public officials.

The fifty wealthiest members of China’s National People’s Congress are said to own more than $94bn. 

Expect many more probes into how and where leadership wealth was made. Over a million officials have been prosecuted, removed from office, disciplined or punished in other ways in five years.

Renewable energywill improve China’s environment

Green tech investment will be a major priority for the Chinese government over the next 20 years. 

This will be for two reasons: firstly, to satisfy public pressure to clean up polluted air in cities, protect water supplies, and improve the environment generally. Secondly to ensure China dominates this huge global revolution, helping to decarbonise power production, reducing emissions, reducing manufacturing waste and so on.

We are already seeing three times America’s investment into renewable energy each year, especially wind power.

Expect far-reaching measures to reduce water pollution and food contamination. 

China now requires 15,000 enterprises to publicly report their air pollution levels, water use and heavy metal discharges in real time – until recently such matters were government secrets. It is hard to overstate the significance of this major shift in government policy.

From export-led growth to domestic-market dominance

China’s image as the factory of the world will change, as costs of manufacturing in China continue to rise. 

China will lose jobs to nations like Vietnam, Cambodia and Myanmar – even to Europe, Mexico and the US. 

China’s future economy will be driven more by domestic demand from its own growing middle class, and by investment in new technologies such as high-speed rail, wind energy and biotech. 

Growth of retail spending in China is likely to exceed GDP growth by 3?5% on average over the next decade, as middle-class consumers save less, and draw down their assets.

China will rapidly buy up the world’s assets

China’s Sovereign Wealth Fund is already worth $1 trillion, invested in government debts in other nations or ownership of global companies. 

China will go on buying up assets in Europe, America, Nigeria, DR Congo, Indonesia and other emerging markets – whether land, mineral rights, utilities, infrastructure, factories or service companies. 

In addition, China’s largest corporations will seize majority stakes in major competitors across Europe and America over the next 15 years.

Back home, expect booms and busts in Chinese real estate, with risks of a severe banking crisis due to poorly controlled lending and accumulated bad debts, particularly in the state sector. 

Such a crisis could be large enough to destabilize and depress global markets for a decade.

We will continue to see bold, visionary moves by the Chinese government, resulting in giant nation-wide industrial enterprises and breathtaking infrastructure projects. China will continue to spend between 6?8% of GDP on infrastructure for the next decade.

Territorial disputes and armed conflicts

China will expand it’s regional influence, largely through economic means. China is unlikely to be as territorially or militarily ambitious as other superpowers have been in the past, except in the case of sparsely populated islands, which would enable it to extract new energy or mineral resources. China will have challenges managing all the territory it already controls, including Tibet.

As with Russia, events from the Second World War are likely to continue to overshadow foreign policy, in particular the relationship with Japan. This particularly relates to alleged atrocities which are downplayed by many Japanese leaders.

More global giants will pull out of China while Chinese multinationals grow

Expect ongoing complaints by many global businesses and smaller investors that business is difficult in China. 

Expect some multinationals to pull out altogether, blaming a wide range of barriers to business including corruption, red tape, hostility by government to companies that take profits out of China, careless attitude to intellectual property, ruthless self-interest, lack of transparency in business dealings, etc. 

Revlon, L’Oréal (Garnier brand) and Yahoo were among the first to abandon China. 

Many governments will also continue to worry about IT contracts with Chinese companies supplying telcos or other infrastructure, with equipment which could potentially be hijacked by the Chinese government for spying or other hostile purposes.

Chinese companies to watch

Alibaba – world’s largest e-commerce platform, specialising in business to business sales.

Lenovo – bought IBM’s computer business, now world’s largest PC maker, bought Motorola’s smartphone business and IBM’s server business. Third-largest smartphone maker after Apple and Samsung.

Huawei – second-largest telco equipment company in world, banned from US and Australia public sector contracts over fears that its equipment could be used to spy on behalf of the Chinese government.

Xiaomi – China’s Apple – smartphone and tablets; threat to Samsung.

Tencent Holdings – 650 million users of messenger App, fifth-largest internet company in the world in 2014 after Google, Amazon, eBay and Facebook. Highly innovative.

Baidu – main search engine in China, with 66% of market, fits in with government rules.

ZTE – one of world’s 10 largest smartphone companies, also telco network equipment. Expect huge success for their ultra-low cost smartphones.

Expect new Asian competitors to become significant global players, with extremely attractive, simple, clever innovations – things that capture the imagination of hundreds of millions of people within days or weeks, making existing dominant players look like dinosaurs. Expect many of the most innovative new web companies to be bought by larger familiar brands.

(Extract from New edition of my latest book The Future of Almost Everything with new chapter on life in the year 2120)