Over the weekend the ChinaSolved linkedin group asked a simple question with deep implications for international managers and owners in China: will the US or Chinese economy recover first. The results of a poll weren’t too surprising – of 45 respondents 42% said that US and Chinese will have BOTH recovered in 18 months – and 31% said that China will have recovered while the US is still in trouble. (See the results and take the survey: http://polls.linkedin.com/p/29708/wxaqt )

That means that over 70% of the admittedly small (and potentially biased) sample feels that China’s economy will recover within 18 months. Only 46% think that the US will be back on track by 4Q2010.

International managers in China need to understand the implications of such a trend – because they indicate that Chinese business trends in 2010 could be VERY different than the ones we saw in 2007.

There is no ‘back to normal’. China isn’t going to recover back to some ‘2007 default setting’ – it will transform in ways that will not help all international businesses equally.

A Shifting Chinese Commercial Landscape:

Western owners and managers who benefited most from China’s economic development – especially over the last 5 years – sometimes forgot that the modern Chinese economy has been a work in process. We all loved the dynamism and vibrancy of China markets when they favored us and our methods – but now things may be changing. 40% of China’s economy was geared to exports and the external economy. This was a great trend for more than just traders and exporters – many international businesses in Shanghai, Beijing and Shenzhen targeted this market, either directly or indirectly.

If ChinaSolved’s recent flash poll does reflect a real trend and China’s economy recovers while the West languishes, we are going to see some significant changes in how business gets done and how money gets spent in China.

What might a post-recovery China look like?

A redefined top-end.
Fewer big-spending Westerners, tighter MNC expense budgets and a general de-rating of Western standards will change the way China defines luxury and status. High End Asian has existed for a while, but it’s always been in the shadow of European standards. As that shifts, international managers are going to have to make sure that their offering stays competitive.

A more middle-class middle-class China
I recently had lunch with Bill Dodson, publisher of This Is China - and he made the distinction between ‘middle-class Chinese’ and ‘entrepreneurial Chinese’. The folks that westerners call ‘middle-class’, most Chinese call ‘rich’. The real Chinese middle-class is huge, value-oriented and very local. The entrepreneurs and returnees, whom we have all been CALLING the middle class, were very international, status-conscious and tended to have jobs that linked them to China’s ‘external economy’. The real middle is on the rise.

More opaque B2B transactions.
As western capitalism gets de-rated in China, so will the annoying trappings of western commerce — like open bidding for contracts, RFPs and transparent procurement. Look for a re-guanxified buying process – even in MNCs.

Larger, more assertive SOE & State actors
The stimulus package shows the direction of China. Private commerce is going to finally and definitively be given a back seat to the SOE/State actors in China business. As some of us have always suspected – market-oriented commerce was just a phase in China. Now that there are plenty of well trained, commercially sophisticated managers in the system, we’ll see China rapidly back away from ‘market socialism’ and towards ‘Statist capitalism’.

Laxer QC, compliance and regulation.
China will be throwing the baby out with the bathwater, and many hard-won gains in the areas of quality control, consumer protection and anti-graft policies are going to fall by the wayside.

Twitter Chinasolved: andrewshanghai