China maintained its position as home to the second-largest number of billionaires in the world, with 406 members on the 2024 Forbes Billionaires List. However, this number is down from 495 last year and a record 626 in 2021. Cameron Johnson, a senior partner at consulting firm Tidal Wave Solutions in Shanghai, highlighted eight obstacles that could affect entrepreneurs and businesses in China, both domestic and foreign. These obstacles include weak confidence, economic uncertainty, lack of transparency in laws and regulations, unclear policy roadmaps, geopolitical challenges, fierce domestic competition, talent shortages, financial hurdles, and high social welfare costs.
Johnson noted that economic growth in China last year was over 5%, but still below pre-Covid levels, leading to uncertainty in business prospects. Additionally, the struggling property sector and unmet domestic demand are dampening entrepreneurial forces in the country, along with employment uncertainty and negative wealth effects from property and stock markets. Lack of transparency in laws and regulations also poses a challenge for entrepreneurs, leaving them guessing and adding complexity to their operations.
Companies in China, both foreign and local, are struggling to understand the policy roadmap for the next 10-20 years. With past decades focused on infrastructure, real estate, exports, and consumer-focused industries, the current path remains unclear. Foreign firms face challenges in localizing critical areas like semiconductors and smartphones due to uncertainties around China’s national security. Geopolitical issues, including pushback from the US, European tariffs, and constraints from Asian suppliers, are further complicating operations for foreign firms in China.
Domestically, fierce competition across industries, such as the electric vehicle market and coffee market, is creating challenges for businesses. Overcapacity and aggressive pricing are common issues, with rapidly evolving market trends. Talent shortages, particularly in advanced manufacturing, are also a concern, as expats exiting the country have slowed down research and development and product development. Small private enterprises in China are finding it difficult to access affordable financing, while large state-owned enterprises and larger private firms have more avenues for securing funds.
High social insurance expenses, averaging 30-40% of an employee’s salary, are weighing heavily on company finances and commitments in China. In this complicated landscape, Johnson advises entrepreneurs to balance caution with strategic foresight and to focus on adaptability and resilience in navigating the uncertain road ahead. The future for businesses in China, both domestic and foreign, remains challenging, with a lack of confidence, economic uncertainty, geopolitical issues, fierce competition, talent shortages, financial hurdles, and high social welfare costs all posing significant obstacles to growth and success.
