Next: Will Beijing Start Feeding China's Private Sector?

10/22/2012 -

For the past 30 years, China's State Owned Sector has been the focus of lending and industrial policy. Ava Chien's view is that China's next generation of leadership - awaiting their appointment in November 2012 - will be pragmatic enough to see that only a diversion of resources toward the private sector - that is, away from overfed SOE's and toward vibrant small private enterprises - will generate needed growth.

CARMOSKY: Welcome to the China Business Network Ava Chien. Ava is CEO and founder of Chien and Associates the consulting firm that integrates all of her experience in management consulting and investment banking. She is an advisor to Bank of America among other clients and we’re talking here today about her point of view on the leadership transition in China prospects for economic growth and management for the economy, before during and after. Welcome Ava and I’m just going to jump into a question. What happens with the economic apparatus while this political transition is in play? Do you think that there is any possibility that growth is going to be revised downward and if it is what is that going to mean for China related enterprises in the U.S.A?

CHIEN: If you are manufacturing in China clearly the slow-down will not affect you too much. However, if you are dependent upon the growth and demand in China then you do need to be worried of what I call economic shifts that are about to take place. From an American point of view, we see China as a large single monolithic entity. However, there is a huge, huge, under reported sector in China and that is the private sector. The manufacturers, the midsized businesses, the small sized businesses, the multi-generational businesses, foreign businesses either from Taiwan or Hong Kong or Singapore these are companies that you will see emerge as a much more important economic sector. The government has done everything in its power in the last thirty years to assist itself to help itself and to preserve itself. However, I think it has reached a point where you can only seek, a fat hog up to a certain point. There is an end to it because it wouldn’t work anymore. The hog could not get up, the hog could not produce. The hog could not subsist anymore. And this is what it has come to. Instead, I think what you will see is the government, which I mentioned previously in one of my writings on the China Business Network, that the government has been charged with delivering a set pace of economic growth. After it has done everything in its power to get it to run and run fast. Using methods that have known before, now they have to recreate. They have to imagine. They have to think out of the circle, and this is a sector where they will reach out to, to help. And that is one area where I see emerging in a very very big and persistent way.