Winning in a world without an economic superpower

05 April 2016

by Dennis Chesley

When China hits a bump in the road, the world feels it. The Chinese economy continues to hold the business world’s attention, and rightly so. Recent turbulence in the world’s second largest economy have made plain many of the implications of Chinese economic ascendency.   

With that said, I believe that many are focusing on immediate uncertainties, while missing the big picture – and bigger impact – trends that are right in front of them. Let me explain.

What The “New Normal” Really Means

It’s true that uncertainty is mounting for those doing business in China. China’s turbulent equity markets have eluded policy-makers’ attempts to promote stability. The nation’s slowdown into a “new normal” growth rate has upended commodity markets and changed the forecasts of every company that had expected to energize growth through the China market. Policy responses directed at everything from state-owned enterprises to exchange rate mechanisms to market functioning to structural adjustment have lacked the kind of consistency to which many global operators are accustomed. These are all issues to keep a close eye on; their effects are rippling across the global economy in real time and all businesses will need to know how to deal with them.

If you look at the big picture, you’ll see that this year’s uncertainty about the Chinese economy is really just a symptom of a much larger and much longer-term set of inter-related trends. The implications of those trends are more complex for business leaders than simply changing growth projections and buying currency hedges. What’s at stake is the direction of travel for the global economy.

The most important trend is the increasing dispersion of economic power. For the next few decades, no single country will be able to dominate the balance of payments as the U.S. has done for more than 70 years. Emerging economies are challenging that status, creating alternative trade settlement mechanisms, development banks, trade blocs and models of state-direction in the private sector. While it will be very difficult for any nation to replace the U.S., America will find it increasingly difficult to project its norms around the world and smooth the friction of cross-border business.

So what’s a forward-looking leader to do?

First, we all need to recognize that we can’t put the genie back in the bottle. New centers of economic gravity are rising, and we’ll need to get comfortable operating in parallel spheres. Second, we all need to recognize that the dispersion of economic power isn’t a crisis. All of this uncertainty can lead to great opportunities for companies that learn to be appropriately competitive. Third, executives can build that competitiveness by focusing on six key areas detailed here.

Follow me @DChesl

Dennis-chesley

Dennis Chesley |  Global Risk Consulting Leader
Profile |  Email  |  + 1 (202) 316 5089

 

Comments

A leader should always makes the right decisions. Being competitive does not only mean risking decisions just to make a good impact. Thanks for your good insights about these matters.

Leaders should make right decisions.thanks

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