Accurate China Insight: This Tiger will have teeth

For the Year of the Ox, the consequence of all the economic uncertainty caused by the global financial crisis, and the resultant recession and slump in world trade was a business environment clearly dominated by a mood of moderation and caution. The celebrations of many people in China‘s entrepreneurial heartland of Zhejiang to welcome the Ox were tempered with bitterness as exports to traditional overseas markets evaporated and the economy cooled to its slowest pace in years.

However, signs were already emerging that recovery, at least in China, was at hand, as consumer spending remained resilient and investment growth grew stronger, spurred on by the proactive Central Government stimulus package of  RMB4 trillion, announced the previous November, and an active government role in economic development.  Local governments across Zhejiang from Hangzhou to Linhai and Ningbo to Jiaxing sent trade and investment missions around the world declaring they were open for business, while Microsoft’s decision in May to locate its first Cloud Computer Centre in Hangzhou and deem the city a model for innovation and protection of intellectual property was very encouraging news.

Despite the economic stimulus, everyone in business seemed to tighten their belts and worked harder than ever to keep their clients. The Ox was an ultra-practical time where innovation, while nice to have, was deemed superfluous. With established businesses focused on consolidation and sticking to tried and tested strategies, Zhejiang’s celebrated entrepreneurial spirit was tested to its limit. Those entrepreneurs committed to setting up new business ventures in creative enterprises such as new media, or even trying to stay in business, would have found the Year of the Ox a difficult period to raise the necessary capital in such an overly cautious investment environment.

The characteristics of the tiger, an animal of momentum, energised, hasty in action, fearless, displaying a willingness to engage in battle appropriately describe a Year of the Tiger traditionally associated with great change, wars, social upheaval and catastrophes.  As such, following on from the reflective, conservative Ox, the Year of the Tiger is very likely to be a year of extremes and instability not just on the world scene, but also in business.

Despite the unpredictability, the Tiger symbolises a year where people are more optimistic and take more risks. Opportunities lie in wait for those in business who approach the Year of the Tiger with caution, are mature in the battles they want to fight, and who avoid making hasty decisions particularly in relation to new business partnerships and agreements. The Tiger is also a good time to add the momentum necessary to push forward slow-moving business initiatives, as this may well be the year when they take off.

So after a miserable Year of the Ox, this all means that the Year of the Tiger has to be better, right? Think again. The bill for staving off the global financial crisis from hitting China’s economy is coming due and the central government is already taking a long hard look at what it has to show for the trillions of RMB¥ it pumped into the economy. Meanwhile, growth in the global economy remains elusive at best, which raises the prospect that economic growth in China may falter as the stimulus diminishes.

With the global economy hobbling along, the prospect of multilateral cooperation fixing the worlds ills has taken a backward step, as evident in the recent breakdown of the Copenhagen Climate Summit.  Unfortunately, as a result, there is the real potential for trade pressures between China, the US and Europe to explode in the Year of the Tiger, with the RMB¥ to US$ peg becoming even more of an issue in China’s bilateral relations as governments among its main trading partners grapple with rising unemployment rates.

Given that an act of terrorism can upset markets anytime, the risk of further sovereign defaults, and that treating the symptoms of the global finance crisis are not the same as removing the causes (the markets could nose-dive again) the Year of the Tiger is sure to be volatile, while the Year of the Rabbit in 2011 will be a much easier time for all!

 

Accurate China Insight - Year of the Tiger

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