Originally published by Gordon Orr on LinkedIn: This Is How Smart Multinationals Can Align with President Xi’s Anti-Poverty Priorities
One of President Xi’s key commitments during the recent 19th Party Congress was to accelerate the elimination of poverty in China, indeed to entirely eradicate it by 2020.
This is not a totally new commitment; it is something he has emphasized time and again, even during his tenure in roles that preceded his becoming President in 2012. He believes that it is a key role of the Party to deliver on this and has made it a personal priority to achieve this.
While doubtless there could be some miracles of statistical manipulation that make progress seem greater than it is in reality on the ground, there will for sure be a myriad of initiatives aimed in this direction, launched by central government and enthusiastically implemented by ambitious local government officials.
The provinces most likely to benefit are those with the lowest GDP per capita today, ranging from 51% to 70% of the national average, and comprising a total population of almost 200 million.
Province: GDP per capita (USD 2016), population (million)
Guangxi: 5,678 48.38
Shanxi: 5,299 36.82
Tibet 5,291 3.31
Guizhou 4,988 35.55
Yunnan 4,707 47.71
Gansu 4,134 26.10
As reference, Thailand’s GDP per capita is around USD5,900, South Africa’s USD5,200.
Smart multinationals will find opportunities here in a number of areas.
First is the consumer opportunity. These provinces have the largest number of consumers just entering the steep part of the S-curve where their income levels reach a point that allows them to become modern consumers. And in their major cities they have pockets of consumers with considerable wealth.
Some of this opportunity can be tapped into online but some requires physical presence. That is why the new Chinese owners of McDonald’s are focusing their aggressive new store opening program (of several stores a day) in coming years into these geographies. It is also why Swire is investing heavily to develop its retail bakery business in cities across southwest China. Education service providers are opening private schools in cities they would not even have visited a few years back. And with limited competition, returns can be high. Medical clinics see similar trends.
Second is the market access opportunity. For example, data center operators have been required in recent years to invest in provinces such as Guizhou and Inner Mongolia. The intent, starting to be successful, is to create a critical mass of inward tech investment that a cluster becomes self-sustaining. If a company is looking for a special deal, special permission to own a larger than normal share of a business in a restricted sector, early market entry into a closed sector, these are the local governments to talk to.