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Economy 'no house of cards'

China Daily | Updated: 2013-07-05 07:21

Core to this new business model has to be, at its very root, a multi-year approach to transformation, a desire to shrink bad business areas and not allow small level protectionism, building upon best practice within operational tools processes and systems, and to expand those areas that bring about profitable business lines and customer segments.

Fostering this innovation in business is also about ensuring the right financial pillars are there for SMEs and entrepreneurs. There is a need for commitment to expand micro-finance investment and micro-credit opportunities in the future, as Ning Tang, founder and CEO of CreditEase, argued. They will help move China on from the over-reliance on export-driven economies.

New demography

Today, much of the world is seeing a slow shift towards an aging population. In China this is no different, and the process can only develop even faster. The systemic pressure that this puts on any state can be immense - a reduction in the supply of young labor, an escalation in the financial burden in the care of the elderly, and a weakened family support system.

No company can claim to have understood China without taking into consideration China's new demography, as Jun Fu, executive dean of the Peking University government school, warned.

China's position in the development cycle has an additional problem, that of the need to urbanize large parts of population. Urbanization is central to China expanding middle-class and to continue its expansion as a global economic power.

China will have to, as its leaders will certainly strive to, make sure that the country's transition to urbanization and an expanded middle-class will be able to offset some of the most challenging aspects of the country's demographic change - by strengthening the economy's technological structures and expanding its second- and third-tier cities.

China needs a business environment that's conducive to encouraging this move to a consumption-first model. Many leaders of the past have understood a government's job is to create a favorable system for businesses to thrive, it's then down to businesses to do the rest.

With a better understanding of China's new consumers, new management challenges, and new demography, businesses can gain much greater confidence in working together with the government - and in their own innovation, long-term planning, and market and production operations.

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