Over two recent evenings, Lauder Chinese program students held a forum with MBA students from Tongji University, our host institution in Shanghai. The forum, conducted entirely in Mandarin, gave us a very “Lauder” opportunity to both use our language skills and learn more about business opportunities and challenges in China.
China has been an international manufacturing powerhouse for many years, but recently both the Chinese government and private sector have started looking to grow the country’s services sector. Not surprisingly, much of our discussion was focused on China’s still heavily regulated financial sector. One Tongji MBA student gave a presentation on the varying strategies used by private equity and venture capital funds in China, both of which are important sources of investment but which lack transparency. Another Shanghai student who has worked in compliance for major investment banks explained the regulatory factors that keep major international banks from playing a meaningful role in the domestic Chinese market and gave her suggestions for ways to improve China’s banking regulatory regime.
In the second session, Lauder students led a panel discussion on changing Chinese consumer psychology and the market sectors likely to benefit from rising household incomes in China, specifically education, healthcare, and travel services. The Tongji students agreed with our assessment that globetrotting Chinese consumers are ever more aware that they tend to get less value for money in these segments than consumers in Western Europe, North America, and Japan. We agreed that this creates an opportunity for firms to charge higher prices by reducing local service “pain points.” In fact, this trend is already emerging in local business models, such as private annual checkup clinics circumventing long public hospital wait times and dual curriculum schools preparing students for study abroad without sacrificing their chance to participate in national college entrance examinations.
Overall, we agreed that there is still a great deal of opportunity to develop business ties between the U.S. and China. Despite Chinese policymakers’ prioritization of the development of domestic aircraft manufacturing and a recent WTO complaint by the U.S. over alleged unfair Chinese tariffs on small aircraft, a Tongji MBA student with aerospace industry experience pointed out that both U.S. and Chinese commercial airliners contain a sizable number of components manufactured in the other country. Similarly, Lauder students and our hosts agreed that wealth management and insurance represents another area where U.S. businesses can help add value in China. Given a skewed population structure and rising housing, education, and healthcare costs, the current generation of Chinese earners are building wealth to meet “life-stage” goals knowing that government and family contributions are likely to be minimal. Chinese firms serving the market today have mastered local sales channels but often lack product development and actuarial expertise. If the government were to open these markets to greater competition, U.S. leaders in the space could help increase consumer choice and drive more efficient allocation of savings throughout the economy.
After the forum, the Tongji students treated us to a delicious Chinese hotpot meal. Over bubbling pots of spicy broth, conversation turned to our motivations for doing an MBA and what we wanted to do after graduation – the common question on the minds of MBA students across the world. It was so great to get to exchange views with our Tongji counterparts, and we invited them to come visit us in Philadelphia when they travel to the U.S. as part of their program next year!
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