- As China increases its efforts to become more self-sufficient, market access for foreign companies will highly depend on the industries’ “utility”.
- Utility points to the importance of the sector to China’s development ambitions in the eyes of the Chinese government. This means being able to bring technology and innovation to the country, creating jobs and investment opportunities, and crucially, contributing to the Chinese government’s goals.
- However, as the Chinese market moves more towards local branding, as local competencies grow, and as the government demands substitution, foreign companies will decrease in utility. Foreign luxury clothing, for example, is not critical to China’s growth and will see a dramatic decrease in utility to the market
- Some sectors that can make important contributions in terms of technology will still become more “replaceable” in the long term due to a number of factors. Companies in network devices and cloud industries, for example, are likely to be substituted by local players due to security concerns. These companies will become highly replaceable even if utility does not decrease for the sector.
Sinolytics is a European consulting and analysis company specializing in China. It advises European companies on their strategic orientation and concrete business activities in the People’s Republic.