Watch out for the private giants

It is certainly a good time to be leading a private enterprise in China. We all know about the success of Chinese Internet and consumer electronics companies. But there have also been successes by Chinese private enterprises in other fields. It is hard to pinpoint how much of this has been achieved due to the reduction of some advantages to State-owned enterprises, or due to the shrinking margins of multinationals. But one thing is for sure: It is an ongoing trend that has reached a tipping point.

During my conversations with the heads of the multinational companies operating in China, most of them admitted that it was a daunting task for them to keep track of the rapidly growing private sector in China and the threat posed by the focused approach of these companies.

In my view, I see the development more as the emergence of a new Mittelstand in China. Mittelstand refers to the core of mid-sized industrial companies (often family-owned) that have been the backbone of the German economy for several years. Most the emerging Chinese companies are multibillion-dollar businesses, and most have turnover in the tens of millions or even hundreds of millions range. All of them are fast growing. They are family-owned, often led by entrepreneurs just entering the midpoint of their career - and they plan to be around for a long time.