What Could Really Disrupt China's Economy

Sept. 22, 2015 by Gordon Orr 

As the events of the past few months have shown, the risks of economic disruption are real. Here are several potential risks that could throw China’s economy off track. While the likelihood of all of them occurring is low, they are worth keeping a close watch on:

Jobs

The jobs market is not stressed today, but I believe in the medium term, it absolutely will be.  Officially, 13.2 million new urban jobs were created in 2014; 7.2 million have been created so far in 2015.  Incomes are still rising ahead of nominal GDP, consumer confidence is still strong, and as another positive indicator of income growth, income tax receipts were up 20% in Q2 2015.

We have just passed through a golden decade for blue collar workers in China: wages were pushed up 15% + per annum, income levels allowed many to buy property and a car for the first time ever.  It was perhaps similar to compressing the experience of 1950-80 in US manufacturing into 10-15 years in China.

That is over.  We have reached the tipping point of substituting capital for labor and capital productivity is rising fast. The true impact of technology on jobs is yet to come but it will not be long before the transformation we have seen on production lines is applied to banks and many other industries also.   SOEs have stopped net new hiring and the coming major thrust to restructure SOEs again is not going to change this.  More broadly, the overall PMI on hiring has hovered below 50 since January in both manufacturing and services.

We see growing skills mismatches.  New graduates have seen zero real growth in wages since 2008, leaving them not much better off than taxi drivers.   The good news is that students have finally realized that the old SOE style jobs for life are not coming back. 

In 2015, 12% of new Peking University graduates went to start ups versus just 4% in 2005. Construction workers, retail sales assistants, bank tellers, and security guards will all need reskilling at scale if they are not to become unemployed and unemployable in the more technology intense economy that China is turning into.

Debt levels

Research from the McKinsey Global Institute identified $28 trillion in the Chinese economy in 2014 and that it had doubled in the last 5 years.  Too much of this debt is held in non-value creating businesses and government vehicles.  This continues to make debt more expensive and scarce for the private sector than it should be.  Moreover piling more debt onto existing bad debt only increases the size of the restructuring that will eventually be needed.  I’m looking for signs that the central government is really constraining local government from borrowing more, is requiring state-owned enterprises to honor their debts or be closed down, and that the cost of borrowing in the private sector is falling. 

Leadership credibility

It has not been a great few months for the credibility of China’s leaders as a result of the stock market gyrations and the Tianjin explosion.  If further events were to pile onto these, then it could make it much harder for the government to lead and to act on future reforms that the economy will require.

More specifically:

• If the jobs transition is not handled well we could see the emergence of “zombie cities” with mass unemployment. Any city with a heavy dependence on a single traditional industry such as the northern rust belt cities, coal towns, textile towns and the like is vulnerable. We could see China’s version of Detroit many times over. Equally, zombie generations of former construction workers, miners and others from shrinking industries may emerge if these workers are not reskilled for jobs in the new economy.
• A national health and safety crisis would be very damaging. We have seen massive positive transformations in the dairy industry and agriculture more broadly since the melamine incidents, but the food chain is not perfect.  Local incidents are likely, a nationwide incident much less so but still possible.  It has been more than a decade since the SARS pandemic almost shut down the Chinese economy, a distant memory for almost everyone.  Shortcomings in how SARS was handled damaged government credibility back then.  Is there a better plan for handling a recurrence or an outbreak of MERS in China? I would hope so.

Gordon is a board member of Swire Pacific and Chairman of Westchel, a niche professional services firm focused on Chinese business themes.

Gordon is a senior advisor to McKinsey on China related topics. Gordon was responsible for establishing McKinsey’s China practice, with the opening of offices in Shanghai and Beijing in 1993 and 1995, respectively. From 1999 to 2004, he served as managing director of McKinsey's Greater China offices and subsequently led McKinsey Asia from Shanghai . He has lived in China for nearly two decades.

Gordon is the author of many articles on topics such as innovation in Asia and the globalization of Asian companies, and is the founder of the Chinese-language edition of The McKinsey Quarterly. He is a frequent speaker at major business fora such as the World Economic Forum’s Summer Davos in Dalian.

《福布斯》全球最具创新10名华人企业榜单

以下是2015中国创新企业家

傅盛：猎豹移动CEO

独立创业之前，傅盛最为外人所知的事迹，是以产品经理身份主导了360安全卫士的开发。2010年，傅盛创立的可牛影像与金山安全合并成为金山网络，日后更名猎豹移动，于2014年在纽约证券交易所成功上市。猎豹移动是目前在美上市中国互联网公司中，国际化最为成功的一家，主要用户与收入都来自海外。该公司移动端转型也极为成功——移动端收入占比超过半数。猎豹移动有今日的成绩，某种程度上，得益于傅盛对战略问题的深刻理解。

钱东奇：科沃斯机器人董事长

科沃斯是家庭服务机器人领域的领导企业，也是少数让机器人走入家庭，实现大规模商业化的公司。产品线涵盖扫地机器人、擦窗机器人、空气净化机器人、机器人管家等，构成一个完整的品类，覆盖家居生活的主要方面。

除了家庭服务机器人，科沃斯还在进行“商用机器人”产品的研发。创始人钱东奇1958年出生于南京，1987年从南京大学毕业，取得哲学硕士学问。

随后南下，在汕头大学短暂任教，然后下海南，进入外贸行业，最终在1998年创立科沃斯。

刘作虎：一加科技创始人

2013年年底，刘作虎创立一加科技，10个月实现盈利。相比其他中国手机企业的创始人，刘作虎是一个纯粹的产品经理。创业之前，他有15年硬件行业从业经历和打造产品的心得。1998年，浙江大学毕业以后，刘作虎加入步步高集团，从底层技术工程师做起，一直做到OPPO副总裁。截止目前，一加只发布了两款手机，但在海外市场已经颇具口碑。不谈配置，也不谈性价比，注重工业设计和个性化定制，一加是一个拥有鲜明调性的手机品牌。

刘晓东：百润股份董事长

刘晓东出生于1967年，上世纪90年代初在兰州卷烟厂工作，其后一直从事与烟草相关的香精香料行业。2015年，百润股份收购巴克斯酒业（刘晓东是巴克斯酒业的控制人），后者2014年实现销售额9.82亿元，主营业务毛利率高达75.36%。巴克斯酒业拥有预调鸡尾酒“RIO（锐澳）”，是预调鸡尾酒行业的领导品牌，开辟了一个全新的饮品品类。目前，预调鸡尾酒行业总量还比较小，根据百润股份的估算，仅占整个中国酿酒行业的0.12%，存在巨大的市场空间。

张瑞敏：海尔集团CEO

从1984年出任海尔前身青岛电冰箱总厂厂长以来，张瑞敏一直站立在管理思想的前沿。当下，海尔处在网络化战略阶段，张瑞敏在推动海尔从制造产品的企业，转型为孵化创客的平台。海尔的做法是，把员工从被雇佣者、执行者，转变成创业者、合伙人，为此企业向他们让渡了三权，也就是“决策权、用人权、分配权”。1998年，“海尔文化激活休克鱼”案例进入哈佛大学的教学案例库。2015年，“海尔：与用户零距离”案例再次进入哈佛课堂。

鲁先平：微芯生物总裁

2015年1月由鲁先平担任总裁和首席科学官的深圳微芯生物第一个原创新药“西达本胺”获得cfda批准上市。这是全球首个获准上市的亚型选择性组蛋白去乙酰化酶口服抑制剂，也是中国首个授权美国等发达国家专利使用的原创新药。作为中国新药领域的拓荒者，鲁先平已经在中国这个新药创新的盐碱地耐心耕耘了14年。鲁先平通过建立药物早期筛选评价平台，借助生物芯片、基因图谱、生物统计以及化学基因组学、蛋白质组学、代谢组学等等生物科技领域的最新技术，缩短新药研发周期，降低研发风险，“西达本胺”就是深圳微芯生物这个创新平台的首个成果。

程维：滴滴出行创始人

程维创立滴滴出行三年，目前已将其打造为中国最大的出行平台。成立之初，滴滴以解决打车难为目标，经过三年发展，现在产品每天为超过1亿用户服务，并拥有专车、顺风车、代驾等多条产品线。2015年2月，滴滴和快的正式宣布合并，滴滴快的成为互联网两大巨头阿里和腾讯共同投资的移动互联网公司。目前滴滴估值超百亿美金，程维下一步的目标是将滴滴打造为全球最大的一站式出行平台。

刘自鸿：柔宇科技创始人

在全球新兴的柔性显示领域，刘自鸿创立的柔宇科技公司(Royole)用3年时间，走在了行业创新前列。2014年8月，柔宇科技发布厚度仅为0.01毫米的全球最薄AMOLED柔性显示屏，卷曲半径不到1毫米；2015年7月，柔宇科技成为中国首家宣布实现柔性显示模组和柔性触摸屏量产的公司。最近，柔宇科技完成11亿人民币的新一轮融资，由此用不到三年时间闯入估值10亿美元的公司俱乐部。1983年出生的刘自鸿六年前从斯坦福大学取得电子工程博士学位后，加入IBM位于纽约的全球研发中心担任顾问级工程师。2012年他在中国深圳和美国硅谷同步创立柔宇科技。

廖杰远：挂号网创始人

伴随医疗体制改革，移动医疗领域迎来巨大的发展机遇，2010年廖杰远创立的挂号网是“互联网+医疗”模式的代表。自2014年获得腾讯领投的1亿美元投资后一年，今年挂号网又获得逾3亿美元投资，总市值超过15亿美元，是中国其它几家领先移动医疗公司市值总和。目前挂号网平台聚集了超过1亿实名认证用户、19万名医生，2014年为1.6亿人次提供便捷就医通道。通过连接医院、医生和患者，挂号网不仅在预约挂号，而且在移动问诊和复诊、医药、保险等领域进行纵深的生态布局。廖杰远曾是语音识别专家，早在2005年便成为“福布斯中国科技先锋”人物；他还是百战不殆的连续创业者，目标是“让人人都用上自己的服务”。

马明哲：平安集团董事长

20年内，马明哲带领平安从13名员工的单一财产险公司跻身中国三大综合金融集团，旗下20多家金融公司，业务囊括保险、银行、证券、信托、基金等全金融领域，这为其大数据服务带来超过7亿用户的多维度信息和数据，包含几百多个因子。他还在互联网金融风口上先人一步。今年以来，平安互联网交易总额达5.5万亿元，旗下陆金所交易规模仅上半年便超5000亿。在云计算、人脸识别、眼纹声纹认证、大数据征信与移动支付上也有布局，且大部分已应用到金融业务中。