Original Analysis on Current Events
FAO Global conducts analysis on hundreds of significant events a week that impact the business environment between the U.S., China, and emerging economies in Asia. While most of these assessments are for client and internal use, we like to share events that may have been overlooked if you only follow the major media outlets. We send these assessments out via our newsletter.
Highlights you may have missed for the week of July 15-19, 2019.
1. China’s ageing population lures foreign operators into care market – Financial Times
Our Take: The elderly care services market was worth Rmb500bn ($72bn) last year, but the supply fell short of the demand. The falling birth rate in China indicates that by 2050 a quarter of China’s population is forecasted to be over 65 years, challenging social norms in which family members take care of elders. This calls for the need to have more organized care services to provide support. Although Beijing opened the elderly care sector to private investment in 2014, including to companies wholly-owned by foreign investors, only 9 percent of China’s elderly care homes were profitable in 2015 because of a lack of understanding on what local senior living should be. FAO Global suggests companies who are interested in elder care services in China to focus on the existing demand by to cooperating with local partners who are familiar with the native senior living needs. Through this understanding and partnership, business will not only be better fit to the senior market but will also allow more trust to be gained from the local government in China.
Analysis contributed by FAO Global Policy and Business Associate Jennifer Hsu
2. China’s Economic Growth Hits 27-Year Low as Trade War Stings – New York Times
Our Take: China is experiencing the slowest pace of economic growth (6.2 percent from between April to July) since 1992. One factor is that that the Chinese economy is largely dependent on consumption. Due to the trade war between the U.S. and China, firms on both sides are hurting. The slowing down of the Chinese economy will likely put internal pressure on Beijing to make a deal, however, this should be a private rather than a public debate. FAO Global encourages U.S. firms to follow the trade negotiations closely. Chinese people still have strong purchasing power for imports, and FAO Global predicts that once the deals are made, foreign companies are expected to capture more market share in China and continue to see profits in the China market if executed correctly.
Analysis contributed by FAO Global Associate, Sophia Song
3. Opening-up spurs upgrading of economy – China Daily
Our Take: For 40 years, China’s reform and opening-up process has boosted economic development and progress by reforming economic and legal structures bringing hundreds of millions out of poverty. However, there are still challenges and foreign businesses & governments often complain about the progress. China has launched many additional reforms aimed at further improving the business environment for foreign firms and supporting the private sector, including wider access to foreign investors, IPR protection, financial market reform and measures to boost private sectors. Although China news promotes an improved environment, FAO Global still reminds foreign companies to carefully analyze potential risks including culture collision, monopolized sectors, and issues brought by U.S. and China trade conflicts, while entering Chinese market.
Analysis contributed by FAO Global Associate, Sophia Song
4. US tourism feels trade war pinch – China Daily
Our Take: The U.S. tourism industry is experiencing its first drop in 15 years, a reduction of 5.7 percent in tourist traffic. Much of this is attributed to the U.S. trade war with China causing concern among Chinese tourists. This perception of an unwelcome environment is forcing Chinese tourists to travel to alternative destinations. Unfavorable exchange rates, concerns about safety in the U.S. and President Trump are the primary reasons that are steering Chinese travelers away from the U.S. As Chinese tourists accounts for the largest share of the U.S. tourism, hotel and luxury goods industries are affected the most because of the spending power of Chinese tourists who chase after luxury brands during traveling. FAO Global suggests affected companies and industries be prepared for the possible decline in revenue brought by the trade tensions and to write their state and federal recommendations about their situation.
Analysis contributed by FAO Global Associate, Sophia Song
Edits by Kelli Sullivan
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