Accenture Report on China Five-Year Plan Refreshing and Insightful

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I can assure you that we receive no revenue from Accenture for having run with that headline. And as a former Big 5(4) consultant, it does take a lot to impress me. But Accenture’s recent report, “Five Reasons for the World to Care About China’s New Five-Year Program, receives high marks as a must-read for anyone intending to do business in China or, better yet, for anyone that has not yet found success working in China. The report does two things well. First, it not only discusses the major elements of the 12th Five-Year program (many of us have read the various elements elsewhere) but it places this Five-Year program in context with previous plans and peppers in both good data as well as examples. Second, as the report title suggests, Accenture offers up five ideas that not only go beyond what that firm is famous for (e.g. what I call typical recommendations involving the modification of people strategies, process and/or technologies) but extremely pragmatic advice “think national contribution not shareholder distribution and “properly understand and serve China’s varied customers.

That second nugget of advice might sound generic, but not when you read the explanation behind it: “And there can be an unfortunate inclination to treat Chinese customers businesses as well as consumers as “poor relations who are grateful to receive outdated products. These days, nothing could be further from the truth. Chinese customers are becoming very discriminating and much more confident in declaring their likes and dislikes. I found myself thinking, “Hmm¦have I ever considered China as “poor relations? (No comment!)

The paper discusses one of the country’s most formidable problems the urban-rural income gap, which according to the report has grown to its widest spread in 2009 since the policy went into effect, back in 1978 with urban per capita income at $2525 and rural per capita income at $754. China must rebalance to maintain stable growth. In addition to the income disparity, the paper discusses the “greening of China, to which we can devote multiple posts, but Accenture points out that some of the criticisms of China regarding its environmental policies have resulted in some major positive changes, including the lack of approval for Sichuan Tengzhong Heavy Industrial Machines Co. Ltd to acquire the Hummer brand from GM. We have discussed China’s environmental issues at length in previous posts, but this one addresses the likely impact on metals industries.

Perhaps the most interesting points made in the report, at least in my opinion, relate to China’s globalization strategy meaning its strategies around acquiring companies, natural resources and role as a global corporate citizen. Accenture suggests China has had to adjust its “going out strategy on a number of fronts. One interesting point, “¦a growing realization inside the country [China] that its external connections financial, business-wise, societal and environmental are very important to the nation’s future standing, has resulted in China needing to “adjust its approach to acquisitions, partnerships etc., in essence requiring China to adopt a more global corporate citizen approach. Accenture mentions this has come as a result of fierce competition. We’d argue poor perception (often based on many truths) has created a negative impression of many Chinese entities. The report suggests deal structures have also changed toward JVs and more important, from primary industries to manufacturing and service-based industries. In essence, how China acquires assets and in what form those “acquisitions represent trends worth noting. Accenture points to additional evidence that the Chinese have become more collaborative as they go global, though certainly many deals have failed at the highest levels in other countries for some of the same reasons China has sought particular assets national security.

Whether China has changed or will change remains subject to some debate, particularly on an industry-by-industry basis. Regardless, the report makes for good reading.

–Lisa Reisman

 

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