Future of China

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The Future for MNCs in China
A KPMG Study

kpmg.com/cn

In partnership with

Contents
Introduction The Big Picture: What is next for China and the world’s multinationals? Business Challenges: The end of ‘cheap China’? Rising Consumption: China’s middle class - myth or reality? Regulatory Challenges: A harder place to do business? Regional Differences: There is more than one China The Future: Looking forward to the next decade KPMG Insights: Adapting Strategies for the China Market About KPMG About Silk Road Associates Contact us Case studies Asahi Avery Dennison Bluebell FedEx Genpact Honeywell Jebsen JLL KPMG Maersk OMM Tesco The Executive Centre 41 42 1 3 9 15 21 27 33 37

© 2012 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

© 2012 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

1 | The Future for MNCs in China

China continues to attract the world’s top multinationals seeking to establish a presence and expand their footprint in the world’s second largest economy. Multinationals will continue to play an important role but China has evolved quickly, as have Chinese homegrown businesses. Opportunities abound however, as the CEOs we spoke to point out, it is increasingly important to be flexible in this market and prepared to adapt. It is a competitive environment and Chinese domestic players are now raising the stakes, with global aspirations for their own brands. In terms of the changes that we see taking place, as multinationals move further inland to the tier 3 and tier 4 cities, they face new challenges and may need to consider their investment options, including the joint venture route. We also see a new generation of savvy entrepreneurial business executives in China and as the economy rebalances to emphasise domestic consumption, there will be increasing focus on innovation and on sectors such as clean energy, high tech and services.

Stephen Yiu Chairman, KPMG China

KPMG has mostly grown organically in China and our business focus has also adapted to help both multinationals looking inbound and Chinese domestic companies seeking outbound opportunities. In response to these changes, we launched our Global China Practice (GCP) in September 2010 and we now have China practice teams in over 40 countries around the world. These teams combine China cross-border investment experience, Mandarin language capability and local knowledge to help Chinese firms expand outside China, and assist multinational clients address opportunities in China. Our China business is set to continue to grow and we see Chinese firms’ expansion overseas as a key factor in that growth. Within five years, China’s mainland will be among the top ten markets for KPMG International globally. We also plan to double the size of our Chinese workforce to 18,000 employees in the next four years. In terms of our business strategy, we will focus on building our auditing, tax and advisory services. And as a further demonstration of our commitment to this region, KPMG International last year relocated its Global Chairman office to Hong Kong, the only Big Four accounting firm to do so. Our report highlights the strategic importance of the China market for multinationals and longer-term opportunities for them to establish fully-fledged operations focusing on the domestic market. I would like to thank all of our contributors for their insights and input.

© 2012 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International...
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