According to the front-page story of The Economist this week, “China loses its allure,” China is losing its appeal. In the early 1980s, the then leader of China, Deng Xiaoping, welcomed foreign firms with open arms. The incentives for going to China were irresistible and for the last 30 years this factor has made China one of the biggest and fastest growing markets in the world. However, the opportunity may be vanishing.
In many ways, the market is still enticing, but the window is closing. For one, the country only accounts for 8% of private consumption in the world. At the same time, business is getting harder for foreign companies. The government has always placed undue burdens on tech firms, forging banks, and brokerage houses. But new sweeping consumer-protection laws are going into place and recent regulations are limiting business opportunities. This tighter control may cause serious trouble for China down the line. In fact, some firms like Revlon have already pulled out of the country entirely. If China does not want to lose all of its foreign business they better take some advice from the immortal Ice Cube and, “check themselves before they wreck themselves”.