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2021 China outlook: business and economic recovery
21 April 2021 | Minutes to read: 4

2021 China outlook: business and economic recovery

By Ruby Cheung

As economies begin to recover, we take a look at China’s activity and the big winners of the growing trade demands.

While COVID-19 plunged the world into a sharp recession last year, opportunities have emerged from the gloom. Although the post-pandemic outlook remains uncertain, an increase in inter-regional trade and increased consumption spending is expected to drive APAC GDP forecasts to 5.7% year-on-year.

Vietnam, Malaysia, Taiwan and Indonesia recorded double digit increases from their exports to China in 2020. A GDP growth greater than its pre-recession peak. Despite the trade tensions with Australian Products, our exports hit a record high last year, largely from higher volumes and prices from our iron ore and energy bulk commodities like LNG and coal.

Learnings from the past two years

Rewind to 2019 and small businesses operating out of mainland China recorded a greater increase in activity compared to those in Hong Kong. While the region is known as the entry point for Chinese markets, Hong Kong recorded the largest fall in growing small businesses the same year.

According to the CPA Australia‘s annual Mainland China Economic and Business Sentiment Survey, a key factor to a business succeeding was the use of digital technologies to sell and receive payments. Fast forward to 2020-21 and digitalisation has become central, if not critical, to every interaction with customers, staff and suppliers.

The rising popularity of Ecommerce has seen China’s 2020 growth at 20.1%, totalling $1.8 trillion**. Since the pandemic, more consumers and businesses are comfortable making online purchases. Driving the shift is an increase in mobile internet users and a booming internet services industry. In today’s contactless world, digitalisation is the biggest advantage to responding to emerging customer needs and behavioural changes.

Customer retention and loyalty now plays a paramount role with so many businesses competing for attention online. With e-shopping here to stay, managing cybersecurity and business continuity will be top priority.

But it’s not just about technology and digitisation. Businesses will need to reimagine the customer journey and the evolving needs of their market. With airlines reinventing the travel experience and manufacturers performing functions traditionally done by dealers, leaders will need to assess the changes and benchmark these against their channels and offerings.

Emerging markets in China

The Chinese Government has outlined its economic and social responsibilities in its five-year plan, prioritising technology, environmental responsibility and higher value industries. Judobank’s latest SMEconomics Report indicates that the real growth will be driven from markets linked to the emerging middle class and from the provision of domestic services.

An increasing demand from China’s middle class for quality health care, education, safe food and sophisticated products and services, presents large opportunities for Australian exporters and service providers.

Emerging export markets for Australian businesses:

  • Premium Australian fresh produce and food product exports
  • Brands sold on e-commerce platforms used for shopping events such as China’s 11:11 Singles Day
  • Financial services technology such as fintech and blockchain firms
  • Healthcare suppliers and services focused on areas such as aged care and digital health.

The signing of the Regional Comprehensive Economic Partnership (RCEP) creates optimism for new trade and investment opportunities. For businesses wanting to explore new markets, the RCEP may be the springboard to improving collaboration with China and other Asia Pacific countries.

The digital advantage

The CPA survey results tell us that businesses reporting an increase in profits are also increasing their investments into new technology and capabilities. COVID-19 has no doubt fast-tracked many decisions and the implementation of Ecommerce and digital platforms. Business owners are realising how important marketing and technology is to the customer experience.

Digital transformation has led to the adoption of all types of new technologies. Companies taking advantage of it are able to improve productivity, maximise e-commerce strategies and have a more efficient global reach.

Whether you’re an established business or a startup, a strong digital infrastructure has a multitude of benefits:

  • Ability to target products to customers
  • Streamline supply chain management systems
  • Build big-data-enhanced operations
  • Access to digital marketplaces
  • Create targeted online content
  • Diversify product lines to accommodate new markets
  • Focus on sustainable growth and innovation

As more of the middle-class Chinese join the online wold, we’ll see a new demographic of buyers emerge. The use of technology to sell, distribute and market goods and services has quickly become an advantage for those wanting to reach domestic markets abroad.

With social media also fuelling bottom-line growth, survey results show that businesses recorded more than 10% of revenue through online sales and more than 10% of sales made through new payment platforms. It’s also reported that younger business owners are leveraging new technologies to start a business or attract a new customer base.

With an influx of shoppers and competition on the rise, many Asian businesses are searching for new growth opportunities through innovation, payment technologies and social media channels. We’re seeing a lot of traditional businesses starting to use digital solutions to drive mobile payments. The global pandemic has created a ‘stay at home economy’ and shifted buyer behaviours. Mobile apps, digital tools and ecommerce are some of the biggest advantages in a post COVID-19 environment.

CPA Australia‘s annual Mainland China Economic and Business Sentiment Survey

Australia Mainland China Survey average
2020 Rank 2020 Rank
Businesses that grew in the last 12 months 22.30% 10/11 52.90% 5/11 46.20%
Businesses that expect to grow in the next 12 months 41.40% 10/11 60.20% 6/11 60.80%
Businesses that expect the local economy to grow in the next 12 months 44.20% 9/11 66.50% 6/11 58.60%
Increased employee numbers in the last 12 months 8.30% 11/11 29.5% 3/11 24.80%
Expect to increase employee numbers in the next 12 months 13.00% 9/11 41.50% 5/11 36.1%
will introduce a new product, service or process unique to their market in the next 12 months 6.70% 11/11 21.70% 6/11 23.00%
Expect revenue from overseas markets to grow strongly in the next 12 months 6.30% 9/11 11.20% 7/11 15.30%
Did Not earn any revenue from online sales 51.30% 2/11 4.10% 11/11 22.60%
Did Not use social media for business purpose 42.40% 1/11 6.3% 11/11 18.30%
Investment in technology over the past 12 months has improved profitability 18.90% 10/11 57.00% 4/11 48.10%
More than 10 percent of sales are received through digital payment options such as PayPal, Alipay, WeChat Pay 40.90% 9/11 90.80% 1/11 64.20%
Business has been established for 11 years or less 44.40% 11/11 63.80% 6/11 65.70%
Respondent is aged under 40 18.50% 11/11 63.50% 5/11 53.90%

Look at your data and analytics. It can help you understand how your business is performing, your customer engagement levels and where you need to make changes to operations. It won’t only give you insights to drive efficiencies and improve satisfaction levels, it will also guide you on where you need to be innovative – whether that’s customer experience, processes or products and services.

2021 China outlook: business and economic recovery

Ruby Cheung

Over the past 19 years Ruby has been helping Australian SMEs, individuals and in-bound foreign entities to grow and expand their business.She provides advice on business strategy and planning, accounting solutions, outsource financial management, IPO support, global compliance and governance, taxation and commercial advice.

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