China’s large and still growing population, accompanied by rising household wealth and rapid increases in healthcare spending, has transformed China into the world’s second-largest pharmaceutical market. In 2015, overall pharmaceutical sales in mainland China totaled more than $115 billion, placing China behind only the United States ($330 billion). With a population of over 1.3 billion, the sheer size of the market all but guarantees that the Chinese market will continue to grow despite the problems faced by the healthcare system. “Healthcare is the one market where the market size equals the population,” says Kent Kedl.
China has achieved almost miraculous advancement in a mere 30 years, but at the same time is beset with a host of structural problems and contradictions that it must grapple with, especially as economic growth begins to slow. In this interview, Kroeber, the author of China’s Economy: What Everyone Needs to Know, a comprehensive introduction to China’s rise from an economic backwater in the early 1980s to the world’s second-largest economy, offers his analysis to CKGSB Knowledge on how China got here, where it might be headed, and how to understand the changes and implications.
One of the topics favored most by Chinese tech people is which city, or region, in China will become the next “Silicon Valley”. While observers have not gotten bored of guessing which one will be the next “unicorn” company, those who are really in startup companies have realized the fact that the China startup scene has peaked: many companies have died, using up the money given by investors but keeping no loyal users at all. Read our story about China’s startup bubbles and find how these bubbles, blown up by ambitious yet empty ideas, business plans and investors’ ignorance, finally fall and burst.
Unlike its developed counterparts, China is aging before it gets prosperous. Its population structure is like Japan’s of the 1980s, while its per-capita GDP level has only reached that of Japan in the early 1970s. By far the biggest issue is China’s low birth rate, which declined sharply in the 1980s as a result of the one-child policy. In reaction to the problem, China started to relax its family planning policy since 2013, allowing a family to have two, but so far the results have been lukewarm. Is it too late to climb out of the demographic trap?
Wang Jianlin, Wanda’s CEO, the richest man in Asia once said, “Our goal is to make Wanda a brand like Walmart or IBM or Google, a brand known by everyone in the world, a brand from China.” Dalian Wanda, with assets of over $96 billion, has grown from a property company to a large conglomerate, and has its fingers in many pies: from real estate and retail to sports and entertainment. It is also leading a world-wide buying spree, acquiring top assets such as AMC Theatres, Legendary Pictures, World Triathlon Corporation, and Infront Sports & Media. While trying hard to diversify its business, real estate still takes the largest portion in its revenue structure. But how stable is Wanda empire’s future?
China’s corporate debt is rising fast, and is estimated to be between 145% and 170% of GDP, which is “very high by any measure,” according to the IMF. In most countries this would herald a wave of bankruptcies and be considered a lead indicator for an imminent correction. But in China, analysts are not so sure because the government has a high level of control and a low tolerance for slow growth. People also believe there will not be an imminent financial crisis because the government is the ultimate underwriter.
The emerging middle class is the starting point for many discussions on China’s economy and society. But who are these people that, as Professor Luigi Tomba puts it, are “going to be at the epicenter of every social change that is going to happen” in China? And more importantly, where do they come from? The terms applied to them are misleading. Locally they are something of an economic elite, and even so have not reached the wealth of their supposed Western counterparts – in other words, they are not the “middle” of anything. They are also far from uniform.
The battle for car hailing market share has ended with Uber merging its Chinese business with local rival Didi Chuxing. The merger deal gave Didi a market share of nearly 90%. There are many worries and questions following the deal: will government consider it to be an absolute monopoly? Will passengers pay more and drivers being paid less? How will Didi manage to operate Uber China afterwards? To answer those questions we need to understand the history of Didi Chuxing—how it operated in ‘grey area’ and managed to beat so many other local competitors before it merged with Uber China—find the answer in our article.
Everyone in the world is concerned about how the Chinese economy is faring and understandably so. China’s linkages with the world mean that the health of the Chinese economy has a bearing on other economies as well. The CKGSB Business Conditions Index, based on a survey conducted each month, gauges business sentiment about the macro-economic environment among successful Chinese business executives. BCI registered 54.5 in August, slightly less than July’s 56.3. Corporate sales and inventory levels rose slightly.
Yidao Yongche was the first car-hailing business in China. At first, the company was badly affected by opposition from local authorities—but later on was hit by the rise of Didi and Uber China, which became popular through subsidies and low prices. In July, Chinese authorities finally legalized car-hailing apps and stipulated that unfair competition, such as steep discounts and subsidies, should stop. So will Yidao seize the opportunity and grow? Zhou Hang, CEO and founder of Yidao, talks about his company and the future of the “internet of cars”.