What can we expect in China in 2019?

08 February 2019

With the end of US-China economic equilibrium, the Chinese market is heading for a volatile year. This means businesses will need to stay alert and exercise both caution and risk-taking accordingly. US-imposed tariffs on China are already showing some effects on businesses through restrictions on Chinese exports (regardless of business owner nationality), and restrictions on Chinese companies and investors. While the effects have so far been limited due to China having contingency plans in place, if tariffs result in job losses (and resulting lower consumer confidence) medium-term impacts will be much more serious. Chinese investment into the US is expected to continue falling this year while investment into Israel, UK, Italy and Japan will continue to grow. The Chinese government is and will be intervening in business activity at greater and increasing levels through policy changes and new regulations.

The top priorities for the Chinese government in 2019 will include preventing companies from executing large layoffs, ensuring business compliance with cybersecurity laws and pressuring private sector companies to invest in mixed-ownership models. The predicted volatile business environment will result in lower confidence and lower investment in the private sector. At the same time, growth is expected in cross-border e-commerce and higher Japanese investment in Chinese service sector, thanks to the reengagement between Japan and China – Japanese luxury goods, clothing, pharmaceuticals, cosmetics and even foods are expected to be in high demand by Chinese consumers. Despite the predicted economic instability, Chinese consumer confidence remains high and consumers will be increasingly looking for higher-priced and premium goods in alcohol, cosmetics and fresh foods industries. Consumer spending is also expected to grow in services such as private education and healthtech. These contrasting economic trends for 2019 mean that businesses in China need to be prepared for a wide range of outcomes.

Read the full article on the McKinsey & Co. website.

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