COVID-19 accelerates five key trends shaping Chinese economy: McKinsey report
As a result of the onset of the COVID-19 crisis, five trends shaping the Chinese economy have been accelerated, or "fast-forwarded," a recent report from McKinsey &Company has said.
The first trend is digitization, with digital tools becoming increasingly popular solutions, expanding from business-to-consumer (B2C) to business-to-business (B2B), according to the report released Wednesday.
Nike's first-quarter digital sales in China increased 30 percent year-over-year after the company launched home workouts via its mobile app, while property platform Beike said agent-facilitated property viewings on its virtual reality showroom in February increased by almost 35 times compared with the previous month, the report noted.
Working practices also changed significantly: enterprise communication platform DingTalk almost doubled its monthly active users in a single quarter to 17.7 million.
In healthcare, digital interactions accelerated -- the rapid growth of online consultations, "partly thanks to a regulatory shift in reimbursement policy, as well as broader virtual interactions between pharmaceutical sales agents and physicians," the report said.
These changes occurred ahead of wide deployment of 5G technology, which will likely catalyze the use of digital tools, it added.
The second accelerating trend is declining global exposure, with rising importance of domestic markets, technology and capital, the report showed, noting that despite these trends, "the full picture is more nuanced."
However, the report noted, "given the size and the growth potential of the Chinese market, investing in a supply chain and innovation footprint to serve China will continue to remain important."
"And China for its part will continue to require global technology inputs in order to maintain productivity growth," the report said.
The third trend, according to the report, is growing competitive intensity, "as technology and agility drive winners to capture the lion's share of industry value."
The fourth is what the report called "consumers come of age," as consumers are becoming more prudent and health-conscious.
The last one is the stepping up of the private and social sectors, the report said, with the private sector playing a stronger socioeconomic role, and the social sector rising.
The McKinsey report also noted that as the first country to grapple with the crisis, China has been on the frontlines both of post-COVID-19 economic recovery, and of the societal changes the pandemic has precipitated, adding that efforts to stabilize the domestic economy are "already well underway."
Although China's first-quarter gross domestic product declined 6.8 percent over the previous year, according to government statistics, "our simulations suggest that economic activity may have bottomed out in the first quarter," the report said.
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