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Walking-No, Running- Out Of China.

Although I don’t count myself among them yet, I have seen and heard first hand such talk about this “China Dream” being over and have watched friends an acquaintances slowly dislodging their businesses with plans to be out by the end of Q1 2016.

My natural response was to say “more work for those of us who stay”. But there is something both dynamic and systemic at work that is now allowing this to happen. Local firms are using guanxi and undecutting prices by 10-30%. I’ve also seen the relationships sublty. It’s not blatant among locals to trade professional favors, no matter what the level of work.

My ECD friend has been running global auto and electronics campaigns- mind you a guy who is one of the best here is now being told to “knock off 30% or we’ll find someone else”.

Even the global companies are in the mix, those who have either been thrown out like GSK, Fronterra and Google (they’ll be back), or just reassessing their commitment (think Tesla), will make a loud noise in the aggregate as they create more and more job uncertainty

But the non-institutional mid-level firms who don’t have complex, long term JV deals are preparing to move out and with extreme prejudice. I have four clients who are on the edge of leaving. All in the media and marketing space, but no different than those in other industries.

The CEO of a successful media company in China for ten years has been driven to Australia, Kuala Lumpur and New Zealand, where, with nearly 25% of the workforce now Chinese, the cost of hiring Phd. engineers and digital specialists is now equal to that of hiring a less experienced counter.

When asked about his company, which at its peak in 2010 employed 140 people, he simply said if he “can;t make a profit or maintain similar margins in China, then I’ll just walk away from the entire China market. For my client, profits are four times higher, hiring is 1o times easier and loyalty and lak of job switching is 75% lower

Look at the HQ shifts of media headquarters from Shaghai to Singapore. Part of the shift has been as a result of global strategy moves. But moving people from Shanghai’s media center of the world into the most expensive people market in Asia is a real statement about the hassle-free nature of doing business outside of Mainland China and their trade-offs.

I think that much of the conversation has come about as a result in the disgust with government corruption, the rise of the upwardly mobile local work manaegement force that, in order to get ahead, they must game the system, as has always been the case.

Importantly, government need to seize back control of the “hears and minds” of its citizenry, has put many westerner managers in a bad mood as a result of internet controls over content, social commentary and worse. For many western products, its simply easier to now do business elsewhere. One of my former employer has opened offices in Kuala Lumpur, Vietnam and planning Australia this year. It appears as though they have given up (or screwed up) their first mover status and have chosen to move on

And finally, there continues to be o commitment to the right type of training that allows people to think critcally, make key decisions based on proven influence models and just generally grow up as market executives. I spoke with one senior agency head who has been in China for over 35 years. His Comment? “One generation away.” He answerd the same question in 2006 with the same answer he provided in January : One generation away. I believe him.

terryWalking-No, Running- Out Of China.
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