5 Years ago, Now, and Going Forward
Just How Important is China to Western MNCs?
Just how important is China to western multi-nationals? For years we have been hearing talk of how important China is going to be to western business, and how China as well as other BRIC and developing countries would drive growth for these companies. One of the best ways to measure this is to look at the total contribution of China to the total revenues of leading multi-nationals in China- now compared to several years ago. So is this potential now being realized?
The short answer is, with exceptions, yes. The average China revenue of 20 large multinational corporates increased from USD 2.8 Bn in 2006 to USD 6.1 Bn in 2011- thus more than doubling in this five year period. Just as important, for this sample of 20 MNCs China now accounts for nearly 11% of their global revenues as of 2011.
One big reason for this is that China's market itself has increased substantially, both in absolute terms as well as a percent of the world economy. In 2006 China accounted for 5.6% of the world economy (nominal), and last year this was 10.4%- an increase of nearly 90%. At the same time, for these MNCs, sales to China increased by 88%- almost an exact correlation- as noted in the table. So at an important level, MNCs sales to China have increased less because they are gaining market share, and more to the fact that China has grown so fast.
Figure 1: Importance of China to Western MNCs- an Overview
Source: Company Info, Secondary Sources, GCiS *Nominal