What to expect from China in 2012

Firstly, and fundamentally, I believe economic growth will be strong in 2012, albeit slightly lower than 2011, while I also expect domestic demand, retail spending and infrastructure investment to expand. Growth will further drive business in China, so for Thai businesses looking to solidify their operations in China, it’s imperative that they maintain their focus.

Politically, this year is expected to be one of transition, with President Hu Jintao and Premier Wen Jiabao planning to step down in late 2012, and successors expected to be installed in early 2013. The importance of a smooth transition, maintaining political, social and economic stability, will be a common theme this year.

Further expansion and greater complexity will see the competition for recruitment of good executives become more intense, with further wage hikes likely for the very best executives – a side effect of China’s recent period of growth and success. The Thai education sector can help fill this void by designing Chinese-specific courses, which in the long run will further benefit Sino-Thai business ties.

The China Tourism Academy predicts that the number of Chinese Outbound Tourists in 2012 could reach 78.4 million worldwide, an increase of 12 percent from 2011, and that outbound tourism expenditure will be $80 billion, up 16 percent year on year. With greater means to travel, the world will see more outbound Chinese tourists, providing Thailand with great opportunity – and competition.

In 2010, the number of Chinese visitors to Thailand was 1.1 million; in 2011 it was 1.76 million. To help maintain this kind of growth Thailand should focus on improving local infrastructure as well as introducing new and interesting attractions for Chinese tourists to meet the greater competition in the sector. 

As an aside – albeit an important one – due to the flooding crisis in Thailand late last year, there may be consideration in some quarters to waive the RMB230 visa fee for Chinese tourists to Thailand. However, I do not believe this fee makes any significant difference to tourist numbers (as evidenced by the growth in tourists numbers mentioned above), and I would argue that it be retained. The fee was first waived a few years ago, before being reintroduced in April last year. If it is waived again it will simply be a windfall for Chinese tour operators who are likely to charge their clients the same as before and pocket the extra profit.

In 2012, we will also see a trend of increased US activity in China. With domestic financial pressures, and pressures from traditional European trade and investment zones, US business investment will shift toward the more lucrative, increasingly familiar and growth-driven Chinese market. As every year passes, I see an increasingly interwoven pattern of trade and investment between the world’s great economic powers. Conversely, expect to see more large Chinese companies investing in the West, with many looking to deepen their positions in overseas markets.

E-Commerce will grow further, as the Chinese hunger for online consumption grows. Before long, we will see China become the world’s e-commerce leader (scheduled for some time around 2015).

With China’s stellar rise, it’s not hard to imagine further creativity and investment. So to sum up, in the year of the dragon I anticipate strong economic growth and management, a smooth political transition, an increase in competition for experienced Chinese executives, record-breaking outbound travel, increased cross-border trade and investment, and further growth in e-commerce.