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Making China Your Top Priority

July 22, 2012 • Global Business, Marketing & Consumers, STRATEGY & MANAGEMENT

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By Gong Li, Henry Egan and Andrew Sleigh

Companies have never had such an array of options when it comes to investment opportunities in the emerging world. However, as businesses rush to expand their geographic footprint in the next wave of emerging markets, are they paying enough attention to the biggest opportunity of all? Because take a closer look at the numbers and it’s clear that while the emerging market story may now have a broader cast of supporting actors, China remains the star of the show.

A broadening base of growth

With the United States, Western Europe and Japan facing a protracted period of slower growth, multinational companies are increasingly looking to emerging markets for growth opportunities. Compared with just a decade earlier, the options they can choose from have expanded, far beyond the BRIC economies (Brazil, Russia, India and China) that have dominated the emerging-market story so far. As globalisation continues to spread the benefits of growth and the business environments in many countries strengthen, investment is flowing into markets from South Korea to Saudi Arabia and Turkey to Thailand, to name just a few. Even Africa is finally beginning to generate business interest. Countries that only a few years ago would have been considered frontier now seem familiar to many multinationals. However, as businesses rush to expand their presence in the next wave of emerging markets, they need to remember that emerging markets weren’t all made equal.

With a forecasted growth rate in excess of 7% a year, China’s share of emerging-market gross domestic product (GDP) is expected to grow to 30% by 2020.

But emerging markets weren’t all made equal

Recent research on emerging markets has obsessed about which countries might be worthy of joining the exclusive BRIC club; economies such as Indonesia, Mexico, South Africa and Turkey are vying for a seat at the table. However, a more pertinent question might be whether, from a purely economic perspective, Brazil, India and Russia belong in the same league as China in the first place. In 2010, China accounted for 23% of emerging-market gross domestic product (GDP), more than the remaining BRICs combined. And while the base of growth in the emerging world might be broadening, China’s prominence will actually strengthen over the course of this decade. With a forecasted growth rate in excess of 7% a year, China’s share of emerging-market GDP is expected to grow to 30% by 2020 (see figure 1).



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