The Chinese Transformation
Over the last 80 years, the world has seen a dramatic change where companies have expanded internationally, increasing their sphere of influence on consumers who now spend most of their income on such products and services. Connecting the two markets of China and the US is essential for success in expanding a business into the international markets due to the large middle class with high disposable income in both regions
Over the last decade, China has seen transformational change, evolving from a sourcing destination with low labor costs to the second-largest consumer market in the world driven by an emerging middle class. From 2010 to 2019, China's GDP grew from $6.08 Trillion to $14.34 Trillion, more than a 235% increase over 10 years. Entering China is no longer about benefiting from low-cost manufacturing, but also about strategically reaching hundreds of millions of additional consumers with continuously rising incomes and net worth. In 2020, China surpassed the US as the worlds leading destination for foreign direct investment, receiving $163 Billion of capital inflow, compared to $134 Billion by the USA (according to Reuters).
As China’s economic transformation continues and Chinese companies demonstrate their capacity to innovate, foreign companies need to carefully assess whether their products and services are properly suited for the local market. Summer Atlantic Capital can help you assess if your company’s technology aligns with China’s ever-expanding market.
China's Emerging Middle Class
The average household income in China has increased by over 400% over the last 10 years, consumer spending has more than double over the same period. Domestic consumption has played a significant role in China’s GDP growth. The share of national income retained by Chinese households has risen steadily since 2008, putting China’s middle-class population at over 300 million. Studies indicate this number could reach 550 million in the next three years.
During the 2010-2018 period, all income classes below ¥139k decreased in size, while all other classes increased. The upper aspirant class has seen the largest increase, adding close to 300 million people.
Understanding China's Goals
Opening up foreign investment has been one of the pillars of Chinese reforms since 1978 and has allowed for the transfer technology into China.
Chinese policy roadmaps such as Made in China 2025, outline China’s plan to become the world leader in high-tech and high-value industries by creating globally competitive domestic firms and using international resources to further the advancement of China’s own industries. China’s success was recently demonstrated in 2019 when they surpassed the United States of America as the top source of international patent applications filed with WIPO, with 58,990 applications versus 57,840 in the United States.
China’s ambition is to become the global leader and it aims to make the latest cutting-edge technologies available to its people. The Chinese government is willing to partner with companies that introduce technologies with the goal of bettering the lives of its people. Supply-side structural reforms are the main objectives in China’s economic plan to guide companies in adapting to the continuously growing consumer demand.
From 2010 to 2019, China's GDP grew from $6.08 Trillion to $14.34 Trillion, more than a 235% increase over 10 years.
Data from WorldBank.org
Maximize Your Company’s Returns
Given the recent tensions between China and the US, there might be growing skepticism about China. However, the opportunity of reaching hundreds of millions of additional customers while lowering manufacturing costs with a minimal capital investment is not one that can be easily ignored. Summer Atlantic Capital can help you navigate through all of the challenges of building a reliable operational structure in China. Through our established and trusted relationships, we can help you find the right partners, reducing your time to market, and allowing your company to maximize shareholder value rapidly.
We aim to create long-lasting partnerships between proprietary technology developers and the Chinese stakeholders who aspire to make this technology accessible in their local market. Generating these partnerships will substantially increase the reach of the technology and the profits generated from it. We have a preference for transactions with public companies in the healthcare and technology space.
By entering one of the world’s largest markets through strategic joint venture partnerships or other structures, with limited to no capital outlay and guaranteed distribution, we help fulfill your fiduciary duty to maximize shareholder value. Contact us for a free evaluation to see if we are a good fit. If you would like to learn more about how and why Joint Ventures work, click here to access our free informational pdf.