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Due to the slower growth of the Chinese economy, doing business on the mainland has become more difficult, and companies on the Chinese mainland as well as in Hong Kong should evolve to adapt to the new environment.
That is the advice from Joseph Luc aka “Joe” Ngai, director and managing partner of McKinsey & Company Hong Kong.
“We have had a fantastic 10 years of growth, what I would call ‘unleashing’ of urbanization and the power of the middle class; a lot of infrastructure projects have been built. I think we had a golden 10 years,” Ngai told China Daily.
T he next 10 years will be an even more challenging time, Ngai believes. He said the Chinese economy is obviously adjusting right now, from an investment-led model to a consumption-led one.
Several industries are under pressure right now, either because of oversupply or weakening demand, Ngai noted.
“People are not used to this slightly slower pace of growth, as we are used to the ‘easy growth’ — that even if you were just sitting there, growth would come to you. These days you have to go and find ‘growth’, which is a very different way of approaching it.”
He believes that Hong Kong in particular has been affected by the slowing economic growth on the mainland, and the city has already seen major impact on the retail side. He pointed out that Hong Kong has so long been working as an intermediary between the mainland and the rest of the world. But these days a lot of businesses are going directly to the mainland, and Hong Kong’s position as a middleman has also evolved over time, Ngai said.
“I think about the last 10 years as a relatively easy and prosperous time, and right now we’ve reached a stage where we see a lot of new businesses, while many old businesses are facing a lot of challenges, and companies will have to reinvent themselves. It is a stressful time but it is also an interesting time.”
Ngai believes that all of McKinsey ’s c ustomers have already realized that the environment has changed, and that doing business will get harder. The mobile age, the Internet and digital applications have changed the way consumers interact with the firm.
“So I think companies do not need us to remind them of what is happening, what is interesting is that there are some very serious discussions going on around reinventing themselves, around adapting themselves, around changing the mix of their businesses, changing the combination of the management team to adapt to this new world.”
From that perspective, he said McKinsey is a good consulting partner to help them go through this, as it is useful to find a third party to look at things on their behalf with a fresh pair of eyes.