For anyone running a business, however, the more important point
is that no matter how fast the turnaround comes, success is
unlikely to get easier.
The plates have shifted beneath the global economy in ways that
will increase competitive pressure and squeeze even the most
recession-hardened business models. The winners coming out of this
seismic event will likely be those agile enough to spot the fault
lines quickly and adjust their strategies accordingly.
China is a prime example. Businesses everywhere should closely
track signs that the country's strong growth may be cooling.
Weak growth in Europe, coupled with the continent's debt
problems, uncertainty in the US, and the diminishing
competitiveness of Chinese exports all are taking their toll. Any
slowing of the Chinese economy would have worldwide
Dropping European demand means fewer Chinese exports at a time
when many US consumers are still struggling. While 18 percent of
China's 2009 gross domestic product (GDP) was from government
stimulus spending, both inflation and wages are rising. At the same
time, analysts remain concerned that the mainland's overheated
housing bubble will burst.
For business owners in China and elsewhere, the cost of capital
is in the list of factors that prompt rethinking their
In China, the government has been taking decisive action to curb
growth in bank lending.
Meanwhile, massive government borrowing, for instance, will
increasingly "crowd out" the private debt markets in the developed
world as governments compete with private borrowers for available
And the credit markets are still on edge due to unfolding
trouble in the US commercial real estate market, the ongoing Greek
tragedy in Europe and the concern that an overheated China and
other developing markets may be awash in bad loans.
In the US and Europe, uncertainty about the outcome of
regulatory reforms has further constrained lending, with financial
institutions nervous about their ability to provide capital.
A bursting housing bubble in China would redirect Chinese
capital back to domestic programs, further reducing available
For managers, the end of the easy-money era means a fundamental
rethinking of how to finance investment.
Funding projects from internal cash flow will be more reliable,
but may constrain growth and will certainly favor businesses with
ample cash and strong balance sheets.
Although demand from China and other developing countries could
help offset some sluggishness in the US, these markets will take
time to pick up the slack, despite such trends as rising wages in
China's export manufacturer hubs like Shanghai and Guangdong
Recovery is taking hold, which is encouraging for the global
economy. But for most business leaders, it isn't likely to provide
much of a breather. In China, as elsewhere, there still is a lot of
Michael Thorneman is a Bain & Co partner in Shanghai.
Johnson Chng is a partner in Beijing. Andrew Schwedel is a partner
in New York.