Five reasons for the world to care

about China’s new Five-Year Program

By Gong Li, Alison Kennedy and Andrew Sleigh
Many multinationals’ CEOs are under
increasing pressure to demonstrate that
they can tap the abundant opportunities
in China—whether or not they have a
presence there already. With the release
of China’s 12th Five-Year Program, those
still struggling to tackle such a dynamic,
complex market have a fresh chance to
rethink their strategies. First though, they
have to shed a few preconceptions.
Setting up shop in China’s major cities,
a well-known luxury jewelry maker has
been unable to replicate the success
it has enjoyed in most other countries.
A big reason? Its stores are too small.
Little stores make Chinese consumers
feel disrespected.1
That’s just one instance of how
easy it still is for foreign executives
to misunderstand China and its
people. Not long ago, a brand-name
smartphone maker failed to get the
sales surge in China that it had enjoyed
elsewhere. One of several problems:
The phone was being packaged with
monthly subscription plans but most
Chinese prefer to buy pay-as-you-go
charge cards.2
Just as Western executives think they
are starting to get to know China, the
nation is evolving again—and very
quickly. Despite all that is now known
about the modern nation—in spite of the
extensive coverage of the 29th Olympiad
in Beijing in 2008 and all of the articles
about growing consumer affluence in
China—there’s still a large gap between
the realities of doing business there and
1
the outdated perceptions held by many
business leaders from overseas.
Now there is golden opportunity
to narrow that gap. The central
government is about to release its
12th Five-Year Program, the document
that will guide national policy through
2015.3 Whereas the five-year plans
of previous decades have been only
of passing interest to businesses, the
new program marks a big departure
in intent and implication. It is a
document that foreign business
executives must care about if they
are to participate fully in China’s next
growth phase.
Although the document continues to
highlight the market reforms and the
opening-up process begun several
plans ago, it does not accentuate the
achievement of quantifiable gross
domestic product (GDP) growth rates.
Instead, it strongly emphasizes the
restructuring of China’s economy,
targeting domestic demand, industry
performance, the urban-rural divide,
the “green” economy, and regional
economic structures.
Why this program is different
The main themes of any Chinese
five-year plan are never a surprise.
But the latest strategy has sparked
a lot of interest for many months.
Historically, the five-year planning
cycles have been used as guides for
central government control. Over
time, they have become less about
control and more about guidance
for a fast-growth economy. Thus the
document is now titled as a five-year
program or strategy rather than plan.
But whatever the name, they continue
to influence the plans of China’s many
state-owned enterprises (SOEs) such
as China Construction Bank and oil
and petrochemicals giant Sinopec,
and most of the country’s private
sector is attuned to the five-year
rhythm.
Now, for the first time, the program
includes input from outside of China—
with formal consultation with the
Asian Development Bank and through
many informal channels.4 The reasons
for the external inputs are simple:
The global financial crisis and the
certainty of climate change have
confronted Beijing policy-makers and
planners with the scale and scope
of their nation’s connections with
the rest of the world. And China
confronts a range of social problems
as the gap widens between rich and
poor, and as urbanization challenges
public services across the country.
Previewed in October 2010, when
the Fifth Plenum of the 17th CPC
Central Committee approved its
formulation, the 2011-2015 program
sets out guidelines for balancing
rapid economic growth with factors
ranging from individual income
growth and improved living standards
to environmental sustainability and
greater national competitiveness
beyond the country’s recognition
for its prowess in low-cost
manufacturing. Here are the five
themes in the 12th Five-Year Program
that foreign business leaders must
review as they take a fresh look at
China:
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1. Rebalancing of the economy
Arguably the most pressing of China’s concerns
is its need to restore equilibrium along several
interrelated dimensions. After nearly two decades
of blazing export-led growth, the nation is
anxious to stimulate domestic growth—and is
keen to have the business sector help.

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The government is thinking in
terms of inclusive growth—working
to spread the benefits of China’s
export successes among all its
regions and striving for sustainable
development nationwide. The new
Five-Year Program describes long-term
mechanisms for encouraging domestic
consumption, optimizing investment
structures, and accelerating new
growth patterns driven jointly by
consumption, investment and exports.
Implementation of the program
faces several concurrent challenges.
For a start, the imbalance between
provinces—especially between
the western provinces and highly
developed coastal regions such as the
Pearl River Delta—remains stubbornly
large (see Figure 1). The western
provinces are the least urbanized while
the eastern has some of the highest
urban population densities in China.
Yet Beijing has a long track record
of regional development. Perhaps
the most prominent example is the
Western Development Plan, in place
for a decade. Although that plan’s
overarching objective has been to
reduce poverty—and it has helped to
do so—the bulk of its expenditures
has been on large, capital-intensive
projects intended to lower the cost of
making the west’s resources available
to the commercial and industrial
eastern provinces, according to the
Organisation for Economic Co-
operation and Development (OECD).5
The gap between rural and urban
categories is perhaps the more
worrying problem. In fact, the urban-
rural income gap grew the widest in
2009 since the country launched its
opening-up policy in 1978, according
to state media (see Figure 2).6 In
2009, urban per-capita income was
$2,525 against rural per-capita net
income of $754, with urban incomes
growing more than a percentage point
faster, in real terms, than those in the
countryside. China Daily reports that
government researchers have warned
that measures must be taken soon to
narrow the gap between rich and poor
if China is to maintain stable growth.
So what does China’s urge to
rebalance mean for Western
businesses? First and foremost, it calls
for executives to seek opportunities
in domestic China, not only in terms
of successfully tapping consumer
markets far inland, as automakers such
as Volkswagen and General Motors’
Buick division have done, but in terms
of inward investments. The companies
that can invest in the potential of the
900 million Chinese who don’t live in
the eastern cities—that can help bring
attractive products and services to
those consumers—will be consonant
with the country’s 12th Five-Year
Program.
The rebalancing push also implies
a need for businesses to be very
pragmatic about expansion in China.
The nation is simply too vast and
too varied to enable companies that
may already have a strong presence
in coastal cities such as Shanghai
and Hong Kong to rapidly establish
facilities all over the country. Some
observers indicate that Chinese CEOs
are already setting their strategies by
individual province, much as Western
CEOs set individual strategies tailored
to European countries. Foreign business
leaders should be following suit.
Overall, plenty of homework will be
needed to determine which provinces
and lower-tier cities offer the best
opportunities, and to tailor approaches
accordingly (see "Properly understand
and serve China's varied consumers"
on page 16). If selling to consumers
in Guangzhou differs starkly from
selling to shoppers in Shanghai, the
differences are likely to be even starker
between western areas.
4
Figure 1: Vast differences persist between China’s regions

2008 Statistics East Central West Northeast

Population 36.7% 27.1% 27.9% 8.3%
(relative to national total)

Land Area 9.5% 10.7% 71.5% 8.2%

(relative to national total)

GDP 54.3% 19.3% 17.8% 8.6%

(relative to national total)

Export Value 86.8% 4.1% 4.6% 4.4%

(relative to national total)

Urban Average Income 20,965.49 14,061.73 13,917.01 14,162.02

(Yuan)

Rural Average Income 8,604.01 5,988.11 5,285.81 9,133.73

(Yuan)
East
Central
West
Northeast

Source: National Bureau of Statistics of China: China Statistical Yearbook—2009

(mainland only)

Figure 2: The growing gap between rural and urban incomes worries policy-makers
Income gap between rural and urban

20,000

15,000

10,000

5,000

0
1978

1980

1985

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

per capita disposable income of urban residents (Yuan)

per capita net income of rural households (Yuan)

Source: National Bureau of Statistics of China

5
6
2. Greening of the economy
China has long been frowned upon by other
nations for not pulling its weight in terms of
environmental sustainability. But the nation’s
recent actions belie those perceptions. One
interesting telltale sign : Chinese regulators
withheld approval for Sichuan Tengzhong Heavy
Industrial Machines Co Ltd. to acquire from
General Motors the environmentally challenged
Hummer sports utility vehicle brand.7

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The 12th Five-Year Program
underscores the fact that China is
serious about building a resource-
conscious and environmentally
friendly society. The program’s
specifics address proactive moves
for combating global climate
change, strengthening environmental
protections, and developing a
recycling economy. Other aspects
speak to resource conservation and
management, promoting faster ways
of preventing and responding to
environmental disasters, and finding
better ways to support sustainable
development.
Significantly, the government
announced in November 2009 that
China is committing to cut its carbon
intensity (a reduction in CO2 per
unit of GDP) by up to 45 percent
less than 2005 levels by 2020. 8
The nation also wants 8 percent of
its electricity needs to come from
renewable resources by 2020. And
groups such as the China Energy
Group—a think tank at the United
States government's Lawrence
Berkeley National Laboratory—note
that “it is highly likely that the carbon
intensity goal will indeed bring with
it a [similarly] serious commitment
and effort on the part of the Chinese
government.”9
In recent years, China has exhibited
plenty of enthusiasm for all things
green. Aside from the government’s
recognition of its obligations to the
international community, there is also
the recognition that green business
is good business. According to the
United Nations, China already is out
in front of Asia’s alternative energy
investment trend, investing nearly
$16 billion in green energy in 2008—a
boost of 18 percent over 2007.10
The UN report claims that China has
become the world's second-largest
wind-power market and the world's
biggest photovoltaic manufacturer.
China’s public sector is active.
Just one example: State Grid Corp
of China, the largest electricity
transmission company in the world
and the sole power provider for all
but five Chinese provinces on the
mainland, has pledged to invest $37
billion in smart grid technologies.
Smart grid infrastructure is especially
important in China: A large part of
the nation’s wind-power capacity
goes unused because it cannot
be connected to the aging power
system.11
The private sector is wading in. Auto-
maker BYD, backed by renowned
investor Warren Buffett, has inked a
technology-partnership agreement
with Daimler to develop electric
vehicles for China’s domestic market.12
And financial-sector players are active
as green business stirs up capital
markets. At the end of 2009, China
Longyuan Power Group Corp, the
nation's biggest wind-power producer,
raised HK$20.1 billion in the world's
second-largest alternative energy
initial public offering since at least
1999, according to data compiled
by Bloomberg. And China Huaneng
Group Corp, the country's largest
power producer, is in advanced talks
to buy half of U.S.-based power
utility InterGen for about $1.2 billion,
according to reports.13
So what is the impact for foreign
businesses? Some are already active
as China goes green. 3M China has
been producing eco-friendly products
since it began operating in China
in 1984. Since 2000, the company
has rolled out 98 projects under its
Pollution Prevention Pays program,
reducing an estimated 17,000 tons
of poisonous waste and saving the
company $48.6 million.
Dozens of emblems of China's push
into green technology are constructed
with materials and components
from DuPont. DuPont provides eight
different components in Chinese-
made solar panels. Its Kevlar fabric is
used to make windmill blades lighter
and more stable. The company's
Greater China operations brought
in about $2.1 billion in revenues in
2008. Its solar materials business
grew by 60 percent in 2009, while its
wind-energy business is growing at
about 40 percent year on year.14
The overseas companies that are
most closely aligned with the green
dimension of the 12th Five-Year
Program will be those that think in
holistic terms—not just about the
revenues they can generate in China
but about the contributions they are
making to the nation’s development—
particularly in terms of technology
transfer and development of local
expertise. The world's top wind-
energy companies—including Vestas
from Denmark and Gamesa from
Spain—have made large investments
in the Chinese market. Not long ago,
Vestas made a savvy move, unveiling
a new wind turbine tailored for China
and largely made in China—the first
market-specific turbine developed by
the company.15 Clearly, partnerships,
and skills in partnership development
and management, are hugely
important here.
8
3. Globalization
For some time, China’s rise as a world power has
been viewed with alarm in some circles and as a
welcome trend by many others. Both perspectives
have been on display as the cash-rich Chinese
government has provided liquidity for other
governments and for businesses worldwide.

9
Those perspectives have been evident
as Chinese companies, hungry for raw
materials such as copper, oil and iron
ore, have made major acquisitions as
far afield as Australia and Brazil. SOEs
led the investment charge abroad,
acquiring stakes in natural resource
and manufacturing companies in
more than 100 different countries in a
recent 12-month period.
There is also a growing feeling within
China that the United States was
weakened by the global economic
downturn while China, with a huge
current account surplus going into
the crisis, grew stronger.16 But there
is also a growing realization inside the
country that its external connections—
financial, business-wise, societal and
environmental—are very important to
the nation’s future standing. And there
is more awareness that as the global
economy recovers, Chinese companies
will need to adjust to the reality that
other countries and enterprises may
not be as welcoming as before—and
that they will face fierce competition
for assets of all kinds.
As a consequence, China’s “going
out” strategy, as it is called, is
evolving. In contrast to the past 30
years of reforms, which have focused
exclusively on bringing foreign capital
into the country, China’s strategy
for the future may emphasize the
integration of that effort with
stronger encouragement for the global
expansion of Chinese companies.
Accenture already sees evidence of a
shift toward different deal structures
such as joint ventures and alliances
and a similar but more subtle and
gradual shift in industry focus from
primary industries such as resources
to more deals in secondary markets
such as manufacturing and tertiary
areas such as services. One quite
recent example: Zoomlion, a leading
construction equipment maker,
purchased Italy’s CIFA, a maker of
concrete production equipment.17
The Zoomlion deal was more Beyond that, a key role for foreign
sophisticated than had been typical companies will be to provide objective
of Chinese companies up to then: guidance to Chinese companies that
First, it involved a consortium are “going out.” To date, China’s
approach with investors that included globally minded executives have
investment banks. Second, it involved tended to rely largely on investment
complementary geographic coverage banks for key inputs. But as they
and product ranges with rapidly gain some scars from their ventures
expanding sales and service networks overseas, they are starting to see value
in most major markets worldwide. And in independent inputs from advisors
it also adhered to practices such as with broader perspectives of business
retaining CIFA’s management team and operations all across the multipolar
workforce. world.
Accenture-sponsored research from
the Economist Intelligence Unit in
2010 indicates that these days, only
27 percent of the Chinese executives
who said they were definitely or likely
to make an overseas investment said
they would do so through outright
acquisition. Nearly 30 percent
indicated that they would prefer to
strike joint ventures and a further 18
percent expressed a preference for
alliances.18
There is also growing evidence of
a more collaborative approach by
Chinese companies as they go abroad.
For example, PetroChina and Royal
Dutch Shell have jointly purchased
Australia’s Arrow Energy—which
produces natural gas from coal
beds—in a deal worth approximately
$3 billion.19 Such deals may well
be more common going forward.
However, Chinese companies are
learning that the global merger-and-
acquisition world can be rough: Bright
Food Group, the food conglomerate
owned by the Shanghai municipal
government, failed in its bid to buy
Australian sugar giant CSR in 2010.20
So how should foreign businesses
respond to China’s emerging ideas
about “going out”? In the first place,
they must be aware that those ideas
are changing. Then they should think
about how they need to adapt to
match the opportunities presented
by those changes. Chinese outbound
investment is not going to stop, but
it will not be the same as it was five
years ago. So it is better for overseas
business leaders to think about how
to work with the Chinese and embrace
the opportunity rather than to resist it.
10
 AUD$650

4. Urbanization
The steady exodus of workers from the country
to metropolitan areas is turning into a torrent.
Levels of urbanization in China have risen from
20 percent in 1978 to almost 46 percent in 2008
with an urban population of 600 million. During
the 30-year industrialization process, 420 million
farmers left their hometowns and settled in urban
areas–a scale and speed rarely seen elsewhere.21

11
The Chinese government is taking
the pressures of urbanization very
seriously. The 12th Five-Year Program
emphasizes modernization in rural
areas—such as improvement and
expansion of infrastructure—as well
as improvement management of
urban patterns of life and work. The
announcements to date describe
efforts to promote the development
of modern agriculture and to find new
ways to boost farmers’ incomes.
The challenges are beyond the
experience of any Western government
leaders. In the next three decades,
the number of China's urban residents
is expected to grow by 360 million
people—more than the current
populations of the United States and
Japan combined.22
The implications for the nation’s
stability—economic as well as
societal—are enormous. The China
Energy Group calculates that
household energy use roughly doubles
with urbanization. So the energy
needed to support China’s urban
development policy is expected to keep
growing through 2020, in contrast to
developed countries that have already
achieved high rates of urbanization.23
The urbanization surge also has a
“have-vs.-have-not” edge to it: People
whose parents were born in the
countryside and those whose parents
were born in urban areas have very
different rights. By 2005, 39 percent
of urban dwellers were not registered
locally through China's hukou
registration system, and so had fewer
rights due to hukou's restrictive policy,
notably in the areas of pensions,
health care, and education. They had
little opportunity to work for the
government or for SOEs, according to
the OECD.
That said, the hukou registration
system, dating back to the 1950s, is
up for debate at the highest political
levels. On February 28, 2010, Premier
Wen Jiabao said during a Webcast
that China would advance hukou
reform. The communiqué about the
12th Five-Year Program reinforced the
government’s commitment to broader
reforms in providing social security
and health care. Pilot programs
are already under way in more
than 10 cities, including Shanghai,
Shenzhen and Guangzhou, where
local authorities have begun to grant
permanent residency and access to
social welfare to nonlocals working
and living in their cities.24
Leading economists hold up China’s
urbanization as its opportunity to
significantly rebalance the economy
in several dimensions. The population
migration also presents foreign
businesses with many opportunities—
most that are obvious and others
less so. The construction industry
and affiliated infrastructure sectors
have huge markets in the making;
the financial services companies that
finance their projects are perfectly
positioned too. There are clear roles for
businesses that specialize in complex
integration. And there are openings
for companies that can help blunt the
environmental impact of urbanization
on such a scale. Siemens is in the
forefront of the overseas organizations
in this area as it promotes sustainable
urban development.25
12
5. Innovation
China is clearly eager to move up the value chain,
and sees investment in innovation as a key way to
do so.26 The OECD reports that resources devoted
to science and technology have expanded rapidly
and China now ranks among the top countries in
total research and development (R&D) spending
and number of researchers.

13
The 12th Five-Year Program puts the
spotlight on a necessary economic
restructuring. The intent is to upgrade
China’s manufacturing sector,
accelerate the growth of the service
sector, build a modern energy industry,
expand what the government calls
the “informatization” of industry,
and develop “strategic emerging”
industries.
The plan also calls for greater progress
in both science and technology.
Yet despite the numbers describing
absolute R&D spending, R&D intensity
in China still lags behind other
major countries, with gross R&D
expenditures amounting to almost 1.5
percent of GDP in 2007 (see Figure 3).
Some of the right seeds are being
sown, though. Data from the World
Intellectual Property Office shows
that nearly 8,000 applications filed
under the Patent Cooperation Treaty
came from China in 2009, an increase
of 29.7 percent over 2008.27 China
replaced France as the fifth-largest
source of applicants globally behind
the United States, Japan, Germany and
South Korea. China’s State Intellectual
Property Office notes that these
figures show that a growing number
of Chinese companies are now eyeing
overseas markets and recognize the
importance of intellectual property
protection.
Figure 3: R&D spending of major countries
Gross domestic expenditure on R&D as a percentage of GDP by country
(2007 or latest year available)
Argentina 0.5
India 0.8
South Africa 0.9
Brazil
Russia
China
UK
France
Germany
United States
Japan
Israel
Source: UNESCO Institute for Statistics estimates, August 2010.
At the same time, more Chinese
corporations are striving to move up
the value chain. Zoomlion is a case in
point. To begin with, the construction
equipment maker is successfully
building an intellectual-property
portfolio. The manufacturer has now
developed more than 460 products
with full intellectual property rights
in 13 categories, including concrete
machinery, mobile cranes, hoisting
machinery, road machinery, pile
foundation machinery, earthworking
machinery, environmental and
sanitation machinery, special vehicles
and fire-fighting equipment. In
parallel, the company devotes 5
percent of revenues to R&D. Its
emphasis on innovation is apparent
in its cooperation with the Changsha
Research Institute of Construction
Machinery, a national science and
technology institution with more
than 3,000 professionals.28 And it has
added a services arm: a leasing finance
operation.
Realistically, though, China still
has quite a way to go in terms of
innovation. Addressing the third CEO
Roundtable of Chinese and Foreign
Multinational Corporations in late
2009, Cheng Siwei, former vice-
chairman of the National People's
Congress Standing Committee, urged
Chinese CEOs to invest in innovation
to quickly climb the value chain. He
1.1
1.1
1.4
1.8
2
2.5
2.7
3.4
4.8
noted that a reason for the disparity
between Chinese companies and
leading multinationals is the failure
of mainland businesses to invest in
innovation.29
Foreign business leaders have many
opportunities to help China move
up the value curve from “producer
economy” toward “knowledge
economy.” Not least are their own
efforts to seed R&D activity locally.
That is what chemicals giant Bayer is
doing with its €100 million investment
in a global R&D center in Beijing.30
Similarly, BASF is opening its new
Asia Technical Center in Shanghai to
support R&D on chemicals for the
construction industry in the Asia
Pacific region.31
Others, such as ExxonMobil and
Saudi Aramco, have built partnerships
with Sinopec, China’s largest oil
refiner, to expand an oil refinery in
the southeast province of Fujian to
process 12 million tons of crude a
year. Together, ExxonMobil’s advanced
technologies and Aramco’s crude oil
supplies are helping restructure China’s
petrochemical industry and upgrading
its technology.32
Aside from the more obvious ways in
which Western companies can help
to accelerate the pace of innovation
in China—such as setting up R&D
facilities there—they can also extend
the horizons of technology transfer
initiatives. Efforts could range from
developing specialized training
programs for Chinese engineers and
scientists to forging relationships with
technical, scientific and academic
institutes in China. One other way
to think about innovation: tapping
directly into Chinese consumers for
ideas. Because young Chinese in
particular are assertive users of new
technologies, companies selling to
them can develop fast feedback loops
to accelerate and improve product
development.
14
Five ideas to bear in mind now
Foreign businesses that succeed in the new China
will need to adopt markedly different mindsets
than those of their forebears. These ideas merit
consideration:

15
Think “national
contribution,” not
“shareholder distribution”
More than ever, foreign companies
must be seen to be contributing to
China—not just “taking.” That has
been important so far, but it assumes
much more importance under the 12th
Five-Year Program. What’s needed is
a marked shift in mindset toward the
long-term concerns of China’s markets
as well as Chinese customers, with
less emphasis on quarterly reports
geared to shareholders’ concerns.
The companies that can demonstrate
their long-term commitment to
helping China resolve its toughest
issues—closing the east-west gap,
coping with the urbanization surge,
moving up the value chain, greening
the economy—will find it easier to
secure resources and handle local and
national regulations. For example,
Vestas, the Danish wind-power
company, is building up a strong value
chain in China that can fully support
the construction of wind turbines
from its factories there. Every year,
Vestas, which has been in China for
about 25 years, improves its Chinese
sourcing capabilities, aiming to have
100 percent Chinese-made content
before long. In other words, it is not
necessary to have Siemens’ century-
long legacy in China to be viewed as
the next best thing to being a Chinese
company.33
Don’t wait for the
Program to be
operational
The 12th Five-Year Program is
expected to be published formally
in the spring of 2011, but enough
is known now about its central
ideas to enable businesses to act
now. One of the best moves for
foreign businesses will be to position
themselves in networks of relevant
local relationships so they can tap the
new opportunities depicted by the
Program. Trusted local partners can
best scrutinize the fine print to deduce
which specific activities, which regions
and which industry sectors are likely to
benefit most from Beijing’s guidelines.
It will also help to have the right
relationships with government officials
who understand the rhythms and
subtleties of the five-year programning
cycles. And it will be useful to know
which Chinese companies—SOEs and
private—will make the best allies on
in-country ventures since some will be
better placed than others to benefit
under the new Program.
Focus on two planning
cycles at the same time
Few foreign businesses are familiar
with detailed five-year programming
horizons, let alone organized to
work easily with them. But better
results in China may depend on your
planning group’s ability to keep two
planning calendars in sync at all times:
your organization’s conventional
one-year strategic planning cycles
as well as the Chinese cadence.
In any environment, the strategic
direction of a company is vulnerable
to tomorrow’s uncertainties. By
developing potential scenarios of how
the Chinese government’s plans will
impact the business, executives can
translate relevant trends and events
into competitive advantage and build
robust, “futureproof” strategies.
Properly understand
and serve China’s varied
customers
There’s still a tendency among some
foreign business leaders to think
of China as a nation of 1.3 billion
consumers rather than as a myriad
of market subsets that can be just as
different from one another as those in
the United States or Europe. And there
can be an unfortunate inclination to
treat Chinese customers—businesses
as well as consumers—as “poor
relations” who are grateful to receive
outdated products.
These days, nothing could be further
from the truth. Chinese customers are
becoming very discriminating—and
much more confident in declaring their
likes and dislikes. They have strong
ideas about brands—including overseas
brands—and their requirements are
more complex than many Westerners
imagine, as the stories at the start
of this paper indicate. At the same
time, they are becoming bolder about
Chinese producers’ competitiveness
in many dimensions. Low-value and
poorly differentiated products and
services are of little interest to Chinese
customers; these days, they have an
abundance of homegrown offerings to
choose from.
To properly serve China’s disparate
markets, it is essential to deeply
understand their make-up and
momentum. Data is key to winning
China’s future. Analytics tools and
techniques that can accelerate
customer segmentation efforts will be
invaluable, as will advanced customer
relationship management systems.34
The supply chains needed to move
goods far inland in China will be
especially complex—intraprovince
trade is far more labyrinthine than
within Europe, for instance—so that
is another area where good analytics
methods, tools and practices will
add real value. Similarly with talent
management: Imagine the human-
resources task of sourcing, hiring and
retaining the talent needed to provide
the levels of customer service that
China’s consumers now demand—
and which tens of millions of new
consumers will be expecting.
Get noticed for being
aligned with the Program
It is one thing to build business
initiatives on the back of the 12th
Five-Year Program; it is another to be
noticed for it. So it will be crucial for
your marketing teams to engage with
the publication of the Program and to
build campaigns around subsequent
milestones. Media, analyst and
investor activities are just part of what
a creative team can do to demonstrate
how your company is helping the
nation to deliver in keeping with
its declared directions. One caveat:
Such initiatives presume that your
organization has a recognized brand in
China. Many foreign business leaders
are alarmed to learn that while their
corporations’ brands may be household
names across much of the world, they
may not be at all familiar in China—
especially in the inland provinces.
In such cases, what’s needed is a
reappraisal of brand awareness in the
proposed new markets, whether they
are geographic or industrial.
16
Things are moving at breakneck pace in China—
not just in terms of economic muscle but in terms
of national confidence and expectations. What
visitors experience today is a world away from the
nation that started opening up its borders more
than three decades ago.

In a sense, the 12th Five-Year Program

heralds the opening of another set of
borders—mental borders that have led
foreign business leaders to cling to
outdated preconceptions of China for
far too long. The five planks laid out in
this paper merit immediate attention.
The overseas businesses that grasp the
vast new opportunities will have a leg
up on those that decide to wait and see.

17
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18
About the Authors
Gong Li
Gong Li is the chairman of Accenture
Greater China, leading a team of
more than 5,000 people. With more
than 20 years of cross-industry
business consulting experience,
Mr. Li has collaborated with clients
in government and a variety of
industries, including electronics,
high tech, energy, petrochemicals,
financial services and consumer
products. Based in Shanghai, Mr. Li
has extensive experience working with
Chinese state-owned enterprises on
various programs, including corporate
restructuring, process transformation
and commercialization.
gong.li@accenture.com
Copyright © 2011 Accenture
All rights reserved.
Accenture, its logo, and
High Performance Delivered
are trademarks of Accenture.
ACC10-0904 / 02-1321
Alison Kennedy
Alison Kennedy is the managing
director for Strategy Consulting at
Accenture Greater China. Based in
Beijing, the focus of her work is in
supporting Chinese clients to grow
their business internationally and
supporting multinational clients
to grow their business in China. In
addition, Ms. Kennedy is also the head
of Management Consulting in financial
services across the Asia Pacific region.
Ms. Kennedy has specific functional
experience and specialization in areas
including merger and acquisition
(both pre- and post-merger activities),
geographic expansion, growth
and innovation and business and
organization design.
alison.kennedy@accenture.com
Andrew Sleigh
Andrew Sleigh is a senior manager in
Accenture’s Corporate Strategy group.
He is located in Beijing where he
focuses on assisting clients with their
merger and acquisition activities. Prior
to this role, Mr. Sleigh was the China
lead for the Accenture Institute for
High Performance and has authored
numerous articles on China’s unique
operating environment.
andrew.sleigh@accenture.com
About Accenture
Accenture is a global management
consulting, technology services
and outsourcing company, with
approximately 211,000 people serving
clients in more than 120 countries.
Combining unparalleled experience,
comprehensive capabilities across all
industries and business functions,
and extensive research on the
world’s most successful companies,
Accenture collaborates with clients to
help them become high-performance
businesses and governments. The
company generated net revenues
of US$21.6 billion for the fiscal
year ended Aug. 31, 2010. Its home
page is www.accenture.com.