Believe it or not, the latest crazy fad in China compensation trends (ie: your payroll spend doubling in the next 18 months) may actually have a silver lining. Sure, there’s a good chance you’ll be dead or teaching English in Wuhan by the time it gets here — but let’s just chuck a few ideas around for the heck of it.

Process efficiency and Productivity just stopped being punch-lines in China.

A Level, Lower Playing Field

As real costs in China rise across the board we’re starting to see local firms that used to compete as the low-cost producer or service provider are becoming less competitive. They’re still cheapers, but they are much more sensitive to price increases because it’s their only advantage. International businesses in China, who have already either focused on the lucrative B2B and high-income expat markets, may be feeling pressure, but at least they can raise prices without losing their client base.

For most businesses, the only way to deal with higher prices in the long term is to get more productive and efficient. Many local Chinese mid-sized companies that grew very quickly on surging consumer demand and guanxi financing are now facing a slowdown for the first time. When business slows, you need to understand how to cut costs without gutting the company’s brand, reputation and client list. Most Chinese managers out there have never had to deal with a real down market.

Efficiency and productivity aren’t just about cutting costs. We’ve done that. In a slow-down (or yeah, I’ll say it — a recession) it’s about raising value. It’s about minimizing your own price hikes while finding new ways to add value and improve your efficiency. You already know the bad news — overseas economies are getting hit hard and it’s just a matter of time before China feels it. The good news is that your local competition will be thinned out by the coming market chill. More good news is that you are familiar with the boom-bust cycle and your competitors are not. Make sure you take advantage while you can.

This entry was posted on Tuesday, September 2nd, 2008 at 7:10 am and is filed under Uncategorized, Expatreprenuership, Managing in China, Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.