2025 is going to be a special year for China, world, Roland Berger predicts

The adaption of business and operating models, management and decision-making systems as well as product innovation and differentiation are key for foreign companies to further expand their footprint in the Chinese market, as the nation's economy undergoes profound and deep transformation for more resilience, said a top executive with management consultancy Roland Berger.

Denis Depoux, global managing director at Roland Berger, gave the above advice on Jan 9 in Shanghai, as he launched the company's annual trends report Foresight 2025.

Depoux noted that 2025 might be a quite special year for both China and the world, as they see increasing uncertainties brought by wars, geopolitical tensions, internal politics of many nations, and more frequent natural disasters. The changes in international order coming along with the rise of economic sovereignty in a more multipolar world are expected to bring more chaos in the new year.

In the context of global challenges, the Chinese economy is undergoing a profound transformation that may last for a decade. However, the transformation does not indicate a decade of decline, but suggests a period of volatility, and will eventually bring more resilience to the Chinese economy, said the report.

"The transformation toward new growth engines is crucial for China to shift from a labor and investment-driven growth model to an innovation and technology-led growth model, ensuring its long-term sustainability and resilience against global economic volatilities," said Depoux.

Depoux explained that the Chinese economy is not "slowing down", but is "normalizing". And for multinational companies, the Chinese market still remains "critical" but more challenging.

"Local competition comes as a major challenge, because some Chinese companies are simply on par or close to their multinational counterparts and they are starting to compete in the same basket. We have seen and will see Chinese companies claim leadership in more and more sectors, such as new materials, energy transition, healthcare and artificial intelligence, because of the quickly modernizing Chinese economy and acceleration of development. It will take a lot of efforts to stay competitive (in the Chinese market)," said Depoux in an exclusive interview with China Daily after the report's launch ceremony.

He pointed out that structurally adjusting business and operating models will always be a priority this year, highlighting keywords such as "differentiation", "innovation" and "fitness".

There is still a large, untapped potential in consumption in the Chinese market, which is featured by changing consumer behavior as Chinese consumers become more rational and sophisticated seeking higher-quality of goods and services, said the report.

"In a more competitive market, one key feature for success will be to differentiate products and services. This can be driven by innovation in technology, services and experience for consumers. Also, fitness and being cost competitive through better processes and procurement are always very important in China. This will be even more true in an economy with a lot more pressure," he added.

Despite the gradual transformation of the Chinese economy and higher market competition, Depoux said there is no need for excessive pessimism. Holding an optimistic attitude as ever, he expects more in the Chinese market, advising companies in China to focus on profitability and added value, and prepare the future with innovation.

"I would say, to simplify, if you are very big in China, probably you need to get smaller or make sure you stay very fit. If you are not in China at the moment, make sure you enter the market with a product that is totally different. If you are small in China, get bigger," he advised.