A new report from consulting company McKinsey & Company expects COVID-19 to accelerate a number of key trends in the Chinese economy.
According to the report published on 6 May entitled “Fast-forward China: How COVID-19 is accelerating five key trends shaping the Chinese economy,” five trends which are set to accelerate in the wake of the COVID-19 pandemic include:
- Declining global exposure,
- Rising competitive intensity,
- Consumers coming of age,
- Private and social sectors stepping up.
With regard to digitisation, McKinsey expects digital tools to expand in popularity and make the transition from B2C to B2B.
“Before COVID-19, China was already a digital leader in consumer-facing areas—accounting for 45 percent of global e-commerce transactions while mobile payments penetration was three times higher than that of the United States,” said the report.
“Consumers and businesses in China have accelerated their use of digital technologies as a result of COVID-19.
“Based on our mobile surveys of Chinese consumers, about 55 percent are likely to continue buying more groceries online after the peak of the crisis.”
McKinsey also see an increase in the “competitive intensity” of the Chinese economy as a result of COVID-19, further stressing the importance of digital capability.
“In China, the top decile of companies capture about 90 percent of total economic profit, while the ratio is about 70 percent for the rest of the world, according to our analysis of the world’s top 5,000 companies,” said the report.
‘This leading cohort is comprised of companies that have already digitized and possess highly agile operations, strengths that served them well during the epidemic.”
In addition to accelerating the digitisation of the Chinese economy, the report also expects COVID-19 to drive further growth in the role of the private sector.
“In the wake of the 2003 SARS outbreak, SOEs were the major driver of China’s economy, accounting for about 55 percent of China’s assets, and 45 percent of profits,” said the report.
“Today, the private sector contributes close to two-thirds of China’s economic growth, and 90 percent of new jobs, illustrating a significant shift in the balance of economic power.
“In the wake of COVID-19, joint efforts between government and large private companies have played a leading role.
“For example, Alipay and WeChat supported the Shanghai government’s ‘Suishenma’ health QR code launch to help contain the spread of the virus.”