McKinsey: What will happen in China in 2014

Mr. Ou Gaodun, Chairman of McKinsey's Asia Pacific Region, publishes forecasts about China every year. Here are the predictions for this year:

1. Two words are important: “productivity growth” and “technical destruction”

China will strive to control the skyrocketing costs by supporting productivity gains, from labor to land to capital. And, the focus on improving productivity will go beyond factories and into agriculture and services.

China will also rely more on disruptive technologies. One example is the rise of private banks, which is expected to encourage online banking in countries that are crazy about the Internet.

2. The chief technologist is hot

A natural consequence of increasing attention to technology and productivity is relying on managers who can do this. For that purpose, the company is expected to shift its mindset - information technology (IT) is only supported, but it is seen as a means of growth.

"In fact, it is as difficult to get a CIO in a state-owned enterprise as a needle in a nautical mile." Ou Gaodun wrote in the report.

He said that this lack of talented people helps the country achieve its technical goals, which means that a few people who can do it can get higher pay.

3. The government values ​​employment rather than growth

The government is expected to shift its focus from economic growth to creating new jobs for people in the manufacturing and service industries, as productivity increases and disruptive technologies will threaten their survival.

As more graduates leave the campus and find that they are scrambling to chase fewer and fewer jobs, "they will be dissatisfied with it and will not resist." Ou Gaodun warned.

So how will the government solve the crisis that hangs on its head? State-owned companies may “be faced with the pressure to recruit and retain employees they don’t really need,” he said. “The government and the leaders of these companies have long argued that these jobs are the safest. They find it difficult to announce these people. It is sacrificeable."

4. More M&A in logistics

Currently, state-owned enterprises control the $500 billion logistics department, including shipping, ports, toll roads, railways, airports, and small-scale companies. But Ou Gaodun expects that industry concentration will occur at a faster rate than it is now due to concerns about productivity growth.

“Many areas are increasingly encouraging the participation of private and foreign companies, and the intensity of competition may rise.”

5. Dangerous houses in old buildings are widely concerned

According to McKinsey, China can be divided into two in this respect. On the one hand, China boasted some engineering and architectural miracles. On the one hand, they are more exceptional than normal, and more commercial and residential buildings are old and ugly.

“Some cities have reached a tipping point.” Ou Gaodun said that rebuilding failed buildings has become a priority, but the source of funding for these projects is still a question mark, and it is impossible to ignore protests against local openers and governments.

6. Double the mileage of high-speed rail

According to the report, China’s strong interest in high-speed rail will show a new look in 2014, and the focus will shift to expanding passenger traffic on common routes rather than adding new routes.

According to the report, the daily passenger volume of the high-speed rail has jumped from 250,000 in 2007 to 1.3 million in 2013, partly due to the aggressive pricing strategy of the ticket. The Shanghai-Nanjing line has a shuttle every 15 minutes, which is equivalent to nearly 5,500 miles of operating routes and is expected to double in 2015 alone.

“Most of the investment will shift from building a new route to increasing the number of passengers on a route that has been built and operated successfully,” Ou Gaodeng wrote.

7. The solar industry is booming

In 2014, the solar industry will continue to revive, and domestic demand growth is one of the driving forces. Another driving force comes from Japan that experienced the disaster of the Fukushima nuclear power plant. According to the report, Japan's installed capacity has increased from 1.7 million kilowatts in 2012 to more than 6 million kilowatts in 2013, quadrupling.

Ou Gaodun expects a subsidy plan from the State Council to be further expanded this year, which encourages solar panel manufacturers to invest in building and operating solar power plants.

At the same time, due to the adverse effects of severe pollution in China's big cities, a viable market for electric vehicles is expected in 2014, starting with the release of the first car of Shenzhen BYD Daimler new technology.

8. Some shopping mall developers face bankruptcy

The rapid development of online retail is expected to jeopardize the prosperity of traditional physical stores and the interests of mall developers. Electronic retail sales surged by 50% in 2013.

The report said that the number of wholesale clothing and electronics stores is decreasing, although developers plan to increase the size of physical retail stores by 50% in the next three years.

Ou Gaodun expects this trend to jeopardize developers in smaller cities or regions with fewer consumers. And, because of the possibility of mergers and acquisitions, many stores will close down.

9. Shanghai Free Trade Zone is quiet

Ou Gaodun said that the future and potential advantages of the Shanghai Free Trade Zone are still shrouded in vague policies.

One of the advantages of the Free Trade Zone is that companies that are allowed to invest in it do not have to go through an approval process. However, the report pointed out that its restrictions and prohibitions "negative list" are consistent with the categories in the government's foreign investment industry guidance catalog.

Ou Gaodun said that although the free trade zone may ease these restrictions, the ambiguous state gives the authorities "full freedom in 2014 to maintain the status quo of the free trade zone or pursue bolder liberalization - if they think Need some form of stimulation."

"Overall, I think this is unlikely to happen," Ou Gaodun added.

10. European football team invests in Super League

Ou Gaodun admitted that this prediction is a repetition of last year. Due to corruption and lack of foresight, the Chinese Premier League has lagged behind Spain's La Liga and Premier League in terms of ratings, although China has hired star players and David Beckham as ambassadors for the game.

Ou Gaodun pinned the hope of the success of Chinese football on the potential that has not been played and Guangzhou Evergrande won the AFC Champions League - just a year after hiring Italy's Marcelo Lippi as coach.

There is also a possibility that Chinese managers may take action by the following news: Murdoch decided to invest in the Indian football league, and Qatar investors in Manchester City have injected funds into a football franchise company in New York City.

Ou Gaodun said: "The era of the development of sister football teams and the cross-border synergy of brands is approaching." Ou Gaodun said.

At the end of the report, Ou Gaodun called for the end of the "BRIC". The BRIC is short for the English initials of the emerging economies of Brazil, Russia, India, and China. Goldman Sachs global economist Jim O'Neill first invented the term.

The reason for Ou Gaodun was that when the term was invented ten years ago, four countries grew at a similar rate, while China's GDP contributed 13% to global growth, while Brazil, Russia and India together contributed only 9%. However, in 2013, China contributed 29% to global economic growth, and the sum of the other three countries accounted for only 7% of global growth.

"It's time to let the 'BRIC" sink," Ou Gaodun said.

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