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Friday, April 29, 2016

Chinese Economy Will Force American Companies to Make Major Changes

The Chinese economy will be bigger than the U.S. by 2018 according to the article China's Economy Will Overcome the US in 2018 in Forbes.  The U.S. has continued to decline since 2015 while China's continues to rise until a switch in economic strength occurs. American companies will start to make major changes in order to increase competitiveness and ensure they still earn important contracts.

Business is competitive by nature and the Chinese are continuing to push forward with their competitiveness. American companies will need to be more competitive in the future and this requires faster adaptation. Corporate models will change and governmental legislation will adjust to ensure companies can keep up.

Consider the standard American corporation with its layers of management and need to get bigger and larger. As it grows it begins to crush in on itself and lose its innovative abilities. To improve competitiveness will mean moving to flatter and smaller divisions that are able to hedge the competitiveness of innovative groups with the economies of scale of larger businesses.

There will only so much that can be done without finding a partner in government. Tax reform, budgets, infrastructure, treaties, wages and legislation are likely to become bigger issues as business start seeing their options limited. They will pressure government to help them become more competitive by changing their environment.

Businesses will change because they will have to and government will change because it must to maintain its position. However, the process of change is often slow and it is more about convincing minds than it is about simply making adjustments. In democratic societies there is a healthy debate and eventual change but this may be too slow without finding some goals people can agree on.

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