Three long-term trends changing business in China

Joe Ngai, managing partner in the McKinsey Greater China office, discusses how automation will change the face of the Chinese economy—and why this needs to happen given an aging population. The democratization of people’s jobs will be an important trend for Chinese businesses to manage.

What are the top three most disruptive, powerful forces shaping China 10 years from now?

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I think one of the most important forces facing China is the use of artificial intelligence. If I think about China 10 years from now, I can imagine a world where there’ll be a lot of people aided by machines and data to make all sorts of decisions, and to automate all sorts of functions. And that’s really needed, because China is rapidly aging, and we need these machines and artificial intelligence to help us make sure that we can do all the things that we need to do.

I think that the democratization of people and their jobs is going to be one of the big things that will happen in China in the next 10 years. I think that there’ll be lots of talent in different pockets around. They may not all be working for one company, they could be working for different projects. So I think that that is going to be another very big phenomenon that’s happening in China, but also the rest of the world. It’s basically individual freelancers that are pulled into different job functions by companies.

How should CEOs be responding to these forces as they think about their business strategies for the next decade?

I think CEOs should think about their organizations very differently. If you think about the organization today in terms of functions and the established infrastructure, and with the technology, data, and artificial intelligence, I think basically what you need to think about is reshaping your entire workforce. With people retiring, you can replace a lot of these functions by automation. You can think about using a lot more part-timers and freelancers out there; talent that you’ve never tapped in before, but not tie them to a job for the long term. But also, thinking about how they will contribute to your entire organization. So I think that from an organizational standpoint, from an agility standpoint, and from a more flexible work culture standpoint, I think CEOs can start thinking about what would be the dream organization 10 years from now? How do I transition to there? And so therefore, what should I be investing in today?

One more trend that will be a long term trend in China is going to be for consumers that go from today’s gigantic, and in some ways over-consumption, to a more simplistic, a lot more environmentally friendly, and a lot more, I would say, back to basics. So consumption going from today, where they’re trying out everything, to something that’s going to be a lot more conscious and a lot more simplistic. I think that will be a very long term trend in China, but I think that will be a very important one, because that will mean that consumer companies and all sorts of other companies looking at these consumption patterns need to think about environmental friendliness. They need to think a lot more around ethics. They’re going to think a lot more around the source of where, let’s say food ingredients are coming from. They’ll need to think about the practices of labour. So, I think that would also usher in the new age of how organizations can be more responsible. And frankly, that’s going to be a better world.

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