It was interesting to read about Huawei coming out with a foldable phone – not necessarily a very affordable product or destined to be profitable or successful in it’s own right, but certainly a statement of Huawei stepping up to fill the vacuum left by Apple falling asleep at the wheel. Chinese brands have been leading the design and innovation charge in many other categories – notably consumer electronics, appliances, solar power and electric cars, but increasingly in other areas as well.
Normally global brands would look at that and worry about how to win in China against these local innovators. Now, in the context of the China slowdown, I believe they may have a very different scenario to worry about.
So far, everything I’ve read seems to point to people only treating this as a contraction of demand in China for a limited period of time – so if various international companies have business in China they’re thinking about how the contraction of demand will reduce revenue for a while, perhaps a few years at most, before things go back to “normal”.
I believe a far more disruptive trend will emerge in the next few years as Chinese companies also suffer from the contraction of domestic demand in key categories. Companies which hitherto were happy to focus on the massive domestic market in China will now start to expand. Provincial players will go national (an already established trend over the last couple of decades) and national players will go international (also an established trend that will only accelerate).
Will they all succeed? Obviously not – some will learn how to adapt and compete in new markets and some won’t. There are some brands and categories where we can already see Chinese successes – Huawei is clearly one of them. The electric car industry is definitely being led by Chinese brands at this point – brands like BYD and Roewe are way ahead of Tesla in terms of mass producing a viable electric car (in fact, several different models). They have some pretty spectacular consumer electronics and appliance brands as well.
Consumer products may be slower to follow – but inevitably they will.
So here’s the thing to think about. Do you currently have business in China? If so, who are the biggest local competitors you face? Imagine them being local competitors not just in China but in more countries around the world – because that’s definitely going to happen in the next few years. How would you deal with that situation?
There are lots of ways of looking at this, one of the most productive being to try and hedge your bets by buying into some of the most likely future successes from China. The point is to start worrying about it now.