Twelve McKinsey Predictions For China In 2012

Gordon Orr, a director in the Shanghai office of McKinsey, a firm of management consultants, has made 12 predictions for China in 2012:

  1. Government policies will spur consumption and investment.
  2. Dominant models will emerge for reforming rural land ownership.
  3. Real estate will stagnate.
  4. The fundamentals will cause further inflation in food prices.
  5. Chinese investment in green tech will spike upward.
  6. Accounting scandals will continue.
  7. Private-equity and venture capital funds may go ‘walkabout.’
  8. Chinese acquirers will be bolder.
  9. The automobile segment will be slow.
  10. Hospital reform will accelerate.

This Bystander likes (in the sense of agrees with) 6, 7, 8 and 9 and is intrigued by 10. 2 is a bold call. Necessary as land reform is, it will be difficult to push through in a year of political leadership transition. That will also blunt the impact of any efforts towards 1. 5 is this year’s bit-of-a-cheat, given what is outlined in the new five-year plan. 3 and 4 are the least convincing, not because Orr’s logic is wrong, but because the social disharmony they imply won’t likely be tolerated in what is looking to be a bumpy year. What do you think?

By the way, how did Orr do with his six predictions for China in 2011?

  1. Inflation in food prices will take longer than expected to control.
  2. Middle-class bankruptcies will expand dramatically.
  3. Minimum wages will rise, but productivity gains will outstrip labor costs.
  4. China’s economic growth will be lower than expected.
  5. China will step up its “invest out” program in the new five-year plan.
  6. The state will again try to reduce its ownership role in business.

1 and 3 came good. 2 and 4 not so much, though ‘dramatically’ and ‘lower than expected’ give him a lot of wiggle room to claim vindication. 5 was a bit of a cheat in the first place. 6 was wide of the mark, at least in the sense that SEOs increased their dominance in the economy.

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