- 10 months ago
Joe Ngai, senior partner and chairman of McKinsey's offices in Greater China, told CGTN that the message from Chinese leaders at the World Economic Forum in Davos has been ‘remarkably consistent’.
Ngai was talking to CGTN’s Juliet Mann on the sidelines of the WEF.
Ngai was talking to CGTN’s Juliet Mann on the sidelines of the WEF.
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00:00Okay, Joe, look, Vice Premier He Li Feng was speaking earlier at the opening plenary and he focused on China's commitment to dialogue, to multilateralism, to contributing stability and positive energy to the global economy. How do you interpret that?
00:15Well, this is my fifth Davos. And if I think about the message from Chinese leaders and Chinese bureaucrats at Davos, I think that it's been remarkably consistent. If you look back at the last three years, the things that I think they've been saying are all quite consistent and similar.
00:36It's around, let's keep the system as we know it. Let's talk about a global world. This is a world where we need to trade. We need to work with each other. Let's stop some of these unilateralism that's going on.
00:51So I think in some ways, it's not remarkable. It's remarkable, but it's so unremarkable, right? Because it's very consistent. And I think that that voice of consistency is something where they have, you know, portrayed over the years. And I think that they are, you know, they are keeping at it.
01:07When it comes to China's development, he spoke about expanding consumption and building a super-sized domestic market to create opportunities for investors. What does Hearst's messaging signal to you about China's strategy for 2026?
01:24Actually, if you look inside, you know, China's economy, I think that obviously over the last two or three years, there's been a little bit of an overhang of the real estate, you know, bubble bursting.
01:35There's a little bit of a, you know, Chinese companies facing this intense competition.
01:41But if you look at consumer demand, especially around areas like services, I mean, people, you know, don't underestimate the fact that last year was the year where Chinese services was growing actually very, very fast.
01:53If you look at travel, look at tourism, look at a lot of the, you know, the non-fiscal goods, I think that consumption has been going up.
02:02If you look at actually even this year, white goods, right, a lot of the appliances, right, electric vehicles, right, that has been going up.
02:10I think when you look into the, underneath the hood, there's actually quite a lot of positive signals, right, on the consumption side.
02:17If you look at next year or this year, what they're trying to do, I do think that the Chinese consumer will be increasingly an important part of the Chinese economy.
02:25And I think that that's something to look forward to.
02:27Now, we've got to balance that with the exports because those numbers are growing faster than consumption.
02:32So, therefore, it's a bit overshadowing the consumption.
02:35But if you look within consumption, I think it's actually a pretty steady on its way up type momentum that you can see already.
02:43He also pointed to innovation as being a strong engine for growth, which chimes in with the 15th five-year plan recommendations for industrial policy priorities, tech self-reliance, sustainability, sustainable high-quality growth.
03:00Is this a new strategic phase?
03:03I think it's been going on.
03:04I mean, in China, you know, there's actually the, call it the old economy and there's a new economy.
03:09The new economy is all the things that we're talking about, right, AI, you know, EVs, batteries, right, all these things where robotics, right, where I think, you know, and new life sciences, biotech, and all those.
03:22I mean, those are seeing a, I would say, you know, they're seeing like, what's slowdown?
03:28We are growing as fast as ever before, right?
03:30This is something where they are globally competitive.
03:33It's where everyone wants to put more investment in their investors.
03:36They're chasing after these, you look at the, you know, Hong Kong exchange, right, in the past year, the IPOs has been all around this new economy.
03:43I think, however, at the same time, you know, the more traditional, right, the retail, you know, the malls, right, a lot of the old consumption.
03:52I think that's where you see a lot of strain in there.
03:55So I think that what is important in China these days, how do you align yourself?
04:00How do you use technology?
04:02How do you use these new ways to position yourself in the right swim lanes so you're in the growing part of the economy and not in the suffering part of the economy?
04:14And that's really like my message to all clients is around, like, where are you?
04:18And if you're in the wrong swim lane, you better get yourself over there.
04:21Otherwise, you'll be suffering.
04:24Considering the Davos Forum's theme, spirit of dialogue, how might her speech affect China's relationships with Western economies, particularly given tensions over U.S. tariffs and the geopolitical backdrop?
04:37In the last year, we have seen more Chinese companies who are thinking around going global than ever before.
04:46I think that Chinese companies, if you look at, you know, I talk about, you know, the route between Shanghai and Riyadh, right?
04:54I talk about like how, what do you see in Latin America, right?
04:57I do think Chinese companies are looking forward to how do you expand globally, how do you engage more with different corridors that, you know, weren't the traditional East-West corridors.
05:10However, I think the biggest challenge is that I think China was kind of factory for the world before.
05:15I think these Chinese companies need to learn about how to become global citizens of the world.
05:20And I think that that is a transition.
05:22That's something that is a learning journey.
05:24And I think we're in the beginning stages of that.
05:26So I think Chinese interest to engage with the world, to trade, to work with, to partner with the rest of the world, I think it's at this all time high right now.
05:36So the question is, how does the rest of the world and Chinese companies work together to find a way that is a win-win and not a win-lose?
05:43And that's something that needs a little bit of gelling to make sure that actually happens.
05:47You've talked a lot about Chinese companies, but what about foreign companies coming to China?
05:51The message seemed very much to be that China's open for business.
05:55How do you think the next five-year plan is going to signal that China is really good for business?
06:01I think the Chinese economy has always been quite open to foreign businesses.
06:05The difficulty is actually the competition itself in China.
06:10So in China, it's not like it's the Chinese company competing against the multinational.
06:15It's every company competing against everybody.
06:17So in many ways, when you go into China, this is like, I call it the world's toughest gym.
06:24There's no, are you a foreign company, are you a local company, are you an old company, are you a new company?
06:30It is basically everyone's competing against each other.
06:33And in that arena where the world's most competitive business landscape is going on, I think multinationals are realizing that this competition is intense.
06:45And a lot of them in the past 20 years have had a, I would say, enjoyed a pretty good time and actually expanded themselves.
06:53But in the last couple of years, the local competition has really caught up to it.
06:57So the question for them is not one of whether China is open or not, it's whether they are competitive enough to serve a Chinese consumer who are discerning, who are, you know, intensely looking at all the deals out there, looking for valuable money, right?
07:15And how do you compete and do well in there?
07:19The flip side, though, is if you can win in China, you're pretty competitive in the rest of the world.
07:25So, you know, we do encourage multinationals to say, well, you've got to get into that gym, because if you're fit in there, right, you go to the rest of the world, right, in those gyms, right, you're pretty good.
07:37It works both ways, doesn't it?
07:39Because he also said he would then hope for a fair, transparent and predictable marketplace for Chinese companies abroad.
07:47You know, there are geopolitical headwinds, this tricky seeking growth of this fierce domestic market.
07:52How can Chinese companies evolve to become true corporate citizens, global corporate citizens?
08:00Yeah, I do think that Chinese companies have a lot to learn, to engage with the world.
08:04I think that they start with great products and very competitive ecosystem, right, that they compete.
08:11But I think they need to engage a lot more, right, with local communities.
08:14I think they got to, you know, engage a lot more with local industry associations.
08:18Right now, Chinese companies, when they go around the world, I think consumers love them, because they have usually a kind of value for money proposition that everyone loves, right, your great EVs, your great products.
08:32Who is a little bit more anxious are the industry, right, are the other players?
08:37I think the question for Chinese companies is, how do I get more welcomed and not feared by industry associations around the world and other competitors?
08:47And I do think that the word sharing is important.
08:51How do we share more?
08:52How do we share with more, better JV partners?
08:56How do we share with other stakeholders?
08:59How do we make sure that there's enough to go all around?
09:02And I do think that that is something where we all have to learn, right?
09:06I mean, it is around dialogue, it's around more engagement, it's around more participation, right?
09:11And I do think we're at the beginning stages of that.
09:14But if they can master that, there is a lot to be gained on both sides.
09:19And I hope that that will be what we'll be seeing more and more.
09:22Let's throw this forward.
09:24And you've given me a few clues already.
09:26But which industries do you think will be powering China, stoking at that growth in years to come?
09:34The world in the last 15 years have been powered by technology.
09:39And right now, I think in that arena, China actually has a lot of offer.
09:43We work a lot with the industrial companies in China, right?
09:47The way how they're using AI, the way how they're using robotics.
09:50I think that China right now is probably the world's largest use case, right, for industrial robots.
09:59And I think that they're also manufacturing these robots at a rate and at a price point that is going to be very competitive.
10:08What I think these can do, right, is to help the industrialization of many other countries and industries around the world, right?
10:15I think that, you know, what about, you know, Chinese industrial robots helping to, you know, enhance, you know, European industrial competitiveness, right?
10:24So I think that there's a lot of these things where I do see that China used to export products.
10:30I do think in the next era, I think China will be exporting a lot of IP, exporting a lot of new methods, exporting a lot of new ways how to manufacture that can really help local industries.
10:47And I hope that that's what's going to happen because right now we're too focused on China still as a factory for the world, right?
10:54But I do think what they can export, what they can share is a lot more than just hard goods.
11:00There's a lot of intellectual power, right, that I think can be shared around the world.
11:05I think that is what I think the spirit of DevOps here is around, you know, more dialogue, more engagement and more cooperation.
11:13I hope that's what we're going to see.