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China Is In A Pre-Consolidation Stage, But No Billy Joel Please.

By Dan Harris and Steve Dickinson

China Business Blog and Podcast has a great post up on what it calls China's pre-consolidation stage. The post is entitled, "Signs: Observing the pre-consolidation stage in China," and its gist is as follows:

But I think there are some signs that are quite clear that are telling us what stage we are at in China?s growth ? and one of the defining features of this stage is what I call ?pre-consolidation,? meaning, generally, that many industrial sectors in China are still very diverse, fragmented and messy but are in the process of becoming more aligned and streamlined. Instead of trying to further describe this stage, I would like to look at four ?signs? that define what I am calling ?pre-consolidation? and signal that we might be coming to a crossroads. First of all, the biggest sign ? and the easiest to recognize ? is simply the number of players in many market sectors in China. One of the features of a more mature economy is that there have emerged several large players in a particular sector and other players have either fallen away or have been gobbled up (and that?s how the big players got that way, growth by acquisition). The auto industry is a good example ? in the early 1900s, there were dozens and dozens of car companies in the U.S.; today, there are only three (and if the talks GM is reportedly having with Chrysler come to fruition, there will only be two!). China is on the other end of this spectrum. There are over 54 different car companies operating in China and well over 100 brands. Given time, consolidation will happen, but for now, China is in the ?pre-consolidation? stage.

This post does a superb job explaining China's economy from a business perspective and I strongly recommend anyone with any interest in China business read it (or listen to the podcast) -- it is that good . . . .though quoting Billy Joel really ought to be verboten.

Full post as published by China Law Blog on October 30, 2008 (boomark / email).