High Growth Sectors in China

by | June 30, 2015

High Growth Sectors in China

by | June 30, 2015

People see China often as the Promised Land for doing Business. Every Western SME is eager to expand their activities into the Chinese market, as potential can easily be seen in a market with 1.3 billion consumers. However, SME’s that expect ‘the sky is the limit’ are increasingly finding out that is not the case. An increasingly common misconception is the idea that entering China is equal to organizational prosperity. Nonetheless, several certain industries can be singled out as high potential for the upcoming years. China still requires a lot if international investments and knowledge. This article provides insights in 8 different high growth sectors in China.

  1. Advanced manufacturing sector

The increasing GDP of China implies that the consumption of China is currently at an all-time high, and the end is not reached yet. Soon, China will become the largest energy consumer in the world. In order to not lose too much electricity, there is a great need for increasing efficiency in the manufacturing sector. Companies providing environmentally friendly technologies and equipment have high chances of succeeding in the manufacturing sector. Also, waste handling is booming business in China. A good example of a company from Europe who has made it in China is Dutch recycling giant Ciparo.

  1. Aerospace sector

China is trying to get a foot in the door in the global airline industry. In an industry, dominated by Boeing, Airbus and bombardier, Comax is trying to grow fast. Currently, Comax is launching the first ‘ made & designed in China’ airplane. With preorders from Ryanair, the first step is made towards entering the global market. However, Comax will certainly not forget the internal market. Competitor Airbus has forecasted that China will need over 5.300 aircrafts in the upcoming 20 years. With new airports popping up all over the country, the aviation industry in China is growing at unimaginable rates. Companies linked to the aviation or aerospace industries are likely to find a large market.  Airport planning, avionics, advanced manufacturing and industries alike connected to the Aerospace sector have high potential to successfully expand their business in China.

  1. Automotive sector

In the Western world, the sales of cars are stable. People are seeking alternative measures of transportation like cycling. In China, the inverse is true; Chinese are still heavily investing in cars. An expensive car is still seen as an accomplishment. For example, Porsche sold 46.931 units in China over 2014. This number is just a bit less than in the US. Forecasted sales in the automotive industry by 2020 in China stack up to 30 million cars. Opportunities for companies lie within the hunger for fuel efficiency, modernization and luxury imports.

  1. Consumer & retail sector

China’s retail industry is expected to grow 12% annually over the next three years. These are growth numbers that Western companies can only dream about. This growth is a consequence of the growing middle class in China. The luxury market is growing fast, and is currently the largest in the world. Parts of these goods are sold online, as e-commerce is booming in China. Websites as JD.com or Yihaodian are increasing their sales rapidly, and it is a great way to sell in China. China is especially interesting for companies dealing with luxury goods, groceries and food & drink. It must be noted that differentiation is important, and that foreign goods are still having a competitive advantage.

  1. Culture & experience sector

Culture & sport are sectors in which are heavily promoted by the Chinese government. Xi Jingping is a huge fan of football and is trying his best to make China a potential world-Champion. Regarding television programs, Chinese television offers a unique audience of hundred millions of viewers. The Voice of China was watched by over 460 million Chinese at the same time. Other growth industries are (mobile) gaming, advertising & marketing and theme park & leisure attractions.

  1. Oil & gas sector

Currently, 19.5% of the global population is Chinese, and one might thing that this matches the current need of energy; 20% of global energy consumption. Nothing less is true, the energy consumption will increase tremendously over the next years. Total Chinese demand for energy is expected to grow by 72% in 2030. This thirst for energy is being stilled by the China National Petroleum Corp., China National Offshore Oil Corp. and the Sinopec Group. Due to the scarcity of Chinese easy-access oil, companies involved in safety, subsea engineering, HPHT field development and many other industries will find a growing market in China.

  1. Life sciences & healthcare sector

One of the most potent industries requiring foreign knowledge is the life sciences & healthcare industry. The average age of the Chinese population is growing fast, and so is the demand for the healthcare industry. For example, it is expected that China will face 20 million Alzheimer patients in the near future. However, there is little to no knowledge regarding Alzheimer. Private hospitals will be able to quickly import this knowledge, but the vast majority of the Chinese population uses public hospitals. Even worse is the situation in the countryside, in which people need to be educated in order to take care of their parents. This is only one example, and there are many more since public hospitals in China are outdated and their resources restricted.  This offers opportunities to companies involved in medical equipment, medicines and e-health products.

  1. Renewable sector

China is being criticized around the world for their growing air pollution and contribution to the increased CO2 emission. Beijing still produces up to 70% of their energy by burning coal causing large part of the pollution around Beijing. Apart from the fact that many of these problems have arisen whilst creating products for the west, China aims to improve heavily on cutting CO2 emissions. They have installed 20.7 gigawatts of wind power in 2014, nearly half the world’s total. The Chinese government is investing heavily in offshore production. Examples of possibilities for western companies are offshore substations, environmental assessment and marine cabling supply & installation organizations.

“The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand.”  This quote by Sun Tzu explains the importance of preparation in order to achieve success. Knowledge about your market increases the chance of success for any endeavor and is seen as a crucial preparation. Especially in China such information could determine an organization’s prosperity. For in-depth analysis of possibilities within your market, please feel free to contact us.