For the first time in history there are more Chinese than U.S. companies listed in the 2020 Fortune Global 500 index. It is predicted that China will overtake the U.S. as the world’s leading economy between the years 2027 and 2030.
And still, there is the usual knee-jerk reaction in Western companies to discredit the data, making the point that not the strongest, but the biggest are listed, that Chinese companies earned their place because of domestic monopolies, or that individualistic cultures give Western businesses an edge in technology and innovation in the long-term.
Understanding China’s competitiveness
These reactions not only dramatically underestimate the present, but also the future. China has created the world’s most competitive market. Companies entering China can expect up to 10 times the number of competitors compared with their home markets.
China is continuously gaining an edge in competitiveness over other markets, transforming its economy from the world’s workbench to its center of innovation.
China: the new center of innovation
China’s economy is already leading the world in several high-tech industries from 5G to AI, but also outperforming traditional industries related to efficiencies, new technologies and environmental standards.
According to The Economist, the future of global e-commerce is also being staked out in China, not in the West. Driven by a fast-growing middle class in Asia, China already has a higher market worth than the US and Europe combined.
Fueling this massive tech innovation are China’s sky-high patent applications, which are continuously improving, and have surpassed the U.S. as the top source of filings. To boot, China has an exploding number of unicorns (227, only six less than in the U.S.), accounting for a combined 78% of the world`s known unicorns.
How should Western companies face this challenge?
China’s rise as a leading scientific power is getting recognized very slowly. In a recent interview Jörg Reinhardt, Chairman of the pharmaceutical powerhouse Novartis, predicted that Chinese pharmaceuticals will soon be as innovative as their competitors in other parts of the world and he is preparing for more partnerships on eye-level.
While being mindful of political considerations, company leaders need to prepare for a new global economic reality. Instead of decoupling from China by reducing their dependencies, Western companies need to acknowledge China as the world’s growth engine and as an excellent destination for any growth-oriented company. Based on their many successes, it is, after all, an extremely valuable source for deriving learnings.
China’s companies are already too large, dynamic and innovative to be ignored by any CEO or Board member whether or not companies are operating domestically or internationally.
Now is the time to include the “China factor” into business and people development strategies. Understanding China’s new competencies, its strong entrepreneurial mindset and the opportunities presented by strong partnerships will help companies to stay competitive and expand their businesses.
Or as the wise and very apt Chinese proverb states:
“When the winds of change blow, some people build walls and others build windmills.”
If you want to learn more on how to grow your understanding of China’s business, please watch this video: