Companies & Industries

The Challenges Ahead for China


Window cleaner at work in Shanghai, China

Photograph by Alessandro Rizzi

Window cleaner at work in Shanghai, China

Sirkin has been visiting China for 20 years. This is his second post reflecting on China’s progress and challenges.

As we all know, China has made tremendous progress in the past 20 years, moving from the middle of the pack in 1992 to an economic powerhouse today, with a $11.2 trillion economy in 2011, according to the CIA World Factbook, second only to the U.S. To maintain such progress, however, China must deal with several major challenges.

Some are obvious, such as increased cost of energy and raw materials, growing trade tensions with the U.S. and Europe, pollution and health-related issues, and rapidly rising wages, which could price some Made in China products out of the market, giving advantage to other low-cost countries.

But other challenges are systemic and may be even more difficult to resolve.

One area of concern is China’s 30-year-old “one child” policy. In essence, the one-child policy has created a family dynamic is which there are six caregivers for each Chinese child (two parents and four grandparents). This has produced a generation of pampered children, many of whom feel entitled. The question is will they be as motivated—and malleable—as their predecessors?

The one-child policy also has created another problem: The ratio of male to female births has increased from 104:100 to 117:100, a reflection of the premium the Chinese place on male offspring. So there are now tens of millions of Chinese men who have little possibility of having a wife and family. They are men without a future—and that could be a problem.

While the one-child policy stabilized China’s population, giving rise to greater life expectancy, it created a third potential problem as well: a steadily aging population, which is expected to peak in less than 20 years at about 1.4 billion, then decline, leaving fewer workers to support more and more elderly.

Another area of concern is how to deal with increased expectations. For many years now, there has been an unspoken compact between the Chinese leadership and the Chinese people: The people go along with the leadership and the leaders see that their standard of living continues to rise. Keeping up that momentum in the face of increasing expectations will become a difficult task.

Everyone will want more—both standard of living and freedom, which has prompted the government to allow competitive local elections.

China has a lot to deal with. There will be bumps and major challenges along the way. But, looking ahead from Seat 9B on my way home, I am confident that China, with its wealth of people and technological prowess, will find its way.

Hal_sirkin
Harold L. Sirkin is a Chicago-based senior partner of The Boston Consulting Group (BCG), a professor at Northwestern University’s Kellogg School of Management, and co-author, most recently, of The U.S. Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback (Knowledge@Wharton, November 2012).

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