China’s Economic Downturn: Business and Political Implications

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Centre for International Business at the University of Leeds

Ideas in Practice is a seminar series led by Leeds University Business School with the aim of bringing business people, policymakers and academics together. The aim is to discuss important topics and share ideas to help companies and public bodies. Seminars are held in Leeds and London and address key issues in areas such as technology and innovation, finance and the economy, international business strategy, as well as environmental sustainability and inclusive societies.

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As part of our Ideas in Practice seminar series, we are partnering with the China-Britain Business Council and the Business Confucius Institute at the University of Leeds to host a breakfast panel discussion on the business and political implications of China’s economic downturn.

Our panel of experts comprises: Duncan Levesley, China specialist and consultant with Grant Thornton UK LLP; Kerry Brown, Professor of Chinese Studies at the Director of the Lau China Institute at King's College, London; Samer Chamsi-Pasha, the Chairman of Hield China, a subsidiary of the Hield Group (an English textile manufacturer and retailer of men's clothing and luxury goods); and is chaired by Professor Peter Buckley OBE, Leeds University Business School.

Kerry Brown comments: “China has had great economic success over the past 30 years. This is due in part to the plentiful supply of cheap labour, increasing access to the global market, and the ways in which China has been able to create a strong manufacturing sector.

“China is now transitioning from this economic model with its environmental and social costs, to a more service sector one which demands different kinds of inputs and economic modelling.”

Samer Chamsi-Pasha adds: “China’s success is also due to its hard working people combined with a government economic policy which has steered development in a sequential order. This started with basic industries at the beginning which absorbed massive labour into jobs and then moved on to high tech and a knowledge-based economy lately.

“In an ever more connected global economy, China’s domestic consumption has not grown fast enough to take up the slack generated by the declining global markets which has hit its exports. This is one of the contributing factors to its economic downturn.

“Various factors will affect China’s recovery. Obviously the state of the world economy still has a major impact on China’s recovery as it will reactivate its idle capacity while an acceleration of its domestic consumption market will also help it recover quicker.

“As well as business implications, this downturn has a political impact. The unspoken pact between government and citizens, whereby personal freedoms are swapped for personal economic development, will come under increasing strains as the economic growth slows. 

“However, despite all the gloom and doom we hear about, we need to be cognisant of the fact that China’s economy is still growing at around six per cent per year, a whopping figure in comparison to the UK’s growth. So I believe that China invested UK businesses should be able to follow that growth trend just the same.

“UK companies doing business in China need to be aware of the challenges. As Chinese producers start concentrating on their domestic market while continually improving the quality and design of their products, they will increasingly challenge the traditional advantages offered by their foreign competitors. They have a natural advantage in knowing their own consumers and their cultural preferences.”

Duncan Levesley comments: “Cost increases are also a real issue for UK businesses in China, as well as staff recruitment and retention in many sectors.

“The effect the economic downturn has on UK businesses trying to grow in China really depends on the sector in which they are operating. Clearly some sectors are exposed to the macro-economy more than others – financial services, real estate and commodities focused businesses for example. However, the effect on most businesses is much less clear. Far more important are the commercial trends in each sector.

“The best opportunities for UK businesses working in the Chinese market in the current climate tend to be in industries and areas which complement the changes to China’s economic model, consumption trends and demography. Education, healthcare, high tech engineering, advanced machine tooling and robotics, and consumer goods to name just a few areas.”

The Ideas in Practice panel discussion is taking place on Friday 3 June at 7.30am to 9.30am at One Great George Street, Westminster, London SW1P 3AA. There will be a networking breakfast, panel discussion and then opportunity for further discussion and networking.

The event is targeted at businesses with a special interest in the Chinese market and policymakers interested in the implications of the current Chinese economic position for the UK. 

If you are interested in attending the breakfast panel, please email Karolina Jachowicz.

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The views expressed in this article are those of the author and may not reflect the views of Leeds University business school or the University of Leeds.