Even if the Chinese economy misses the worst of the global recession, western entrepreneurs in China are still facing some tough times. 7.5% YOY GDP growth would be a dream in Washington, but it’s a nightmare for Beijing which has recently struggled to reign in 11+% growth numbers. There’s a new test that every business model should have to pass — the long SONG test. (Slow Or No Growth)
Will your business survive a long period of Slow or No Growth in China?
Most western business start-ups in China tend to focus on the high-end of the B2B or B2C service sector. American and European owners have been setting up shop in Shanghai, Beijing and Shenzhen to serve the giant multinational (MNC) supply chain. Sometimes it direct — like the designers and engineers who create new branded products. It can also be an indirect relationship — such as the restaurant owner that serves 80 rmb burgers in an American-themed sports bar.
This is part of the Chinese economy that is most like to be singing the recession SONG for a quite a while.
Making money or starting a successful business in a global recession is not impossible - but you have to make sure that your business model can thrive in SONG environment. Since a typical China start-up is built on very rosy projections of robust economic, you might want to be very careful about the assumptions you have built into your model.
What if China’s growth moderates for then next few years? What if the middle class stops growing? What if discretionary spending disappears?
If you are planning another super-luxury exclusive restaurant on the Bund, then you have an uphill battle on your hands. But if you can provide high-value services at reasonable costs to individuals and businesses that are trying to reduce spending, you may do great.
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The recession may already be upon us:
http://www.chinafinancialplanning.com/?p=43
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