I’ve just finished reading a book called “Will China Dominate the 21st Century?” by Jonathan Fenby, a leading expert on the People’s Republic.

Of course how China performs over the next few decades will affect us all, especially in New Zealand as our export income becomes increasingly dependent on China’s trading policies.

According to the International Monetary Fund (IMF), the People’s Republic of China accounted for half of global growth between 2007 and 2012. The scale and speed of China’s emergence as a major global actor whose economy is set to overtake that of the United States by the end of the present decade has been the most important international event since the end of the Cold War.

One of the main problems that China faces is being able to deal effectively with the conflict between its powerful centralised Communist Party State dictating policies to a growing Capitalist economy model in the Special Economic Zones of the coastal provinces.

This straitjacket will inhibit the change the nation needs to continue to grow.

Its leadership faces a classic paradox: it needs to reform in order to rule more effectively, but reform brings with it the threat of weakening the system and possibly slowing the economy.

Li Keqiang, on becoming China’s new Prime Minister in March 2013, refereed to four main problems with the economy.

1 - The economy is unsustainable

Short-term planning for rapid growth has created an enormous environmental crisis. Water is in short supply in northern China but low controlled price levels encourage waste and little has been done to check the potential disastrous shortfall in northern wheat-growing regions as urban demand has rocketed owing to the expansion of Beijing and other cities. China is also short on energy but the two main developments of shale gas and nuclear power are constrained by the shortage of water needed in both processes.

2 - The economy is uncoordinated

Growth has come from exports and from fixed asset investment in construction and infrastructure. Consumption plays a much smaller role and has fallen as a proportion of GDP. The service sector fell behind as manufacturing boomed. Capital took the lion’s share of economic expansion while wages represented a far lower slice. The result was an unhealthy reliance on more and more construction to keep up the GDP figures demanded by the central power, resulting in a major misallocation of capital and a declining return on investment by local government bodies.

3 - The economy is unbalanced

Alongside the mismatch between investment and consumption, development has been largely concentrated in coastal areas in the Special Economic Zones. This has meant that the countryside has fallen behind. The IMFs world rankings of wealth per inhabitants put the People’s Republic of China 86th on a nominal basis in 2012 saying it has the second largest number of poor in the world after India, and that poverty reduction remains a fundamental challenge.

4 - The economy is unstable

These inequalities lead to discontent, augmented by an array of social factors which when combined with the 180,000 protests each year produce an unstable economic structure. The 2008 stimulus programme is a good illustration of this where the results looked good at first with growth moving from 8% to 10% in 2012 but this was achieved by a flood of cheap credit funnelled through state banks to yet more of the unsuitable projects mentioned above. Inflation soared and local governments were saddled with debts that they could never repay.

China has substantial problems of capital misallocation and excess capacity, weak safety standards, a pollution crisis, endemic corruption, a dependence on imported resources and foreign advanced technology plus a weak record in innovation. Its financial system is fragile and hemmed in with controls from the Party.

Fenby sums up by saying that domination of the 21st century is not a prospect for China when the prime concern will be, for many years to come, to solve the internal problems at home.

If you have any questions after reading the information, go to Contact Us on our website www.DaltonPlan.co.nz and type in your request.

by Dean Dalton DBA
Director, DaltonPlan® Business Action Planning Limited

By Delina Dibben and Florent Vadé
Managing Directors,
Coffee Chic Limited
Info@CoffeeChic.co.nz
www.CoffeeChic.co.nz    
027 332 1956 - Florent 027 661 8807 - Delina

Coffee Chic is a Mobile Espresso Company serving freshly roasted and ground coffee throughout New Zealand. 

My wife and I created CoffeeChic back in 2007 after spending more than 15 years in the hospitality industry all over the world. Having worked in Michelin Star Restaurants on the French Riviera and as a personnel maître de of a French Minister, I do know what exceptional service means.

Coffee Chic go where the business is; from small to big events, concerts, conferences and trade shows, we are the one stop shop for mobile espresso! All Coffee Chic baristas are fully trained and experienced as we pride ourselves on the quality of our service and of our products.

We started with no plan but the business grew and we are now operating all over New Zealand and employing up to 20 people for large national events. We had benefited through Business NZ from a two year mentoring programme but we started looking for some different kind of guidance this year as our sales grew and the Rotorua Chamber of Commerce referred us to Dean Dalton with whom we worked on a more detailed and thorough strategic business plan.

Our business is thriving but taking up too much or our time, time we want to spend with our family, so what we thought that we wanted to focus on was the operational side of it.

Dean showed us that there are four parts to business planning and that operations is only one of them.

He showed us his DaltonPlan Business Benchmarks for gross profit for our industry and we are comfortably above this by a few percentage points. Knowing this we can then move on to optimise our operations and Dean's flow charts are the central tool we need in order to achieve consistency, efficiency and improved performance. We did the plan only recently but we are looking forward to sitting down and working on the charts next week!

We can say that we have gained a better control of our business in terms of decision making. We have been given some tools to evaluate our possibilities and weigh up decisions. We are aiming to increase our profits by mainstreaming our operation, but at this stage we haven't defined our long term goals.

Together with Dean, we developed job costings in Excel that showed us immediately if a job matches our criteria for profitability. We can now weed out the non-profitable jobs and concentrate on securing the more profitable ones.

We have also worked on relationship building, as part of our marketing strategy, and have now secured more venues with contracts. We also want to secure the larger jobs with contracts.