Coping with the economic slowdown

The Chinese economy did not escape last year’s dire global economic conditions unscathed. Since small- and medium-sized enterprises have a much shorter life span in relation to western private companies, there is more pressure and challenges to contend with. Cheung Kong Graduate School of Business (CKGSB) jointly conducted a survey with Ernst & Young with a group of 100 selected entrepreneurs.

The survey results showed that the key issues of most concern to the majority of respondents included intensive competition, the rising costs of both raw materials and human resources, and their wishes for further tax deductions and more relaxed regulations by the government. Despite these concerns, one surprising result from this survey was that 75% of the entrepreneurs showed an optimistic outlook for 2012.

CKGSB Professor Liu Jing warned that the reported results of the 100 responding entrepreneurs in 2011 should not be taken to represent the whole situation. Given the large number of uncertainties with the macro-economic environment, the companies surveyed probably displayed a little too much optimism about the future.

Professor Liu said, “There are lots of uncertainties, for example, the European debt problem, the US housing market crisis, and the Chinese housing bubble, all these are uncertainties. We didn’t even count the political strife in the Middle East, issues with North Korea and other related current events. So there are multiple risks facing us in 2012.” Companies should, on one hand, be adapting themselves to the restructuring of the global economy, and, on the other hand, be preparing for elevated prices in various areas.

However, the CEOs surveyed stated that they will not change the strategic position of their businesses but they want to focus on doing business better. Professor Liu also agrees that in order to get through this difficult period of economic slowdown, cautiousness and conservativeness are indispensable.

“I think we are facing tremendous risks this year. So being conservative at this time is good for individual consumers, as well as the companies. So we might have situations that present themselves that are possibly going to be worse than the financial crisis, so we must be prepared,” he said.