London: The Chinese management consulting market grew by 10 per cent in 2012 to $2.9 billion, despite the fact consulting remains in its infancy in China, with the vast majority of work done by Western consulting firms for large, multinational, Western clients.
The figures are published by specialist consulting research firm Source Information Services in its report, The Consulting Market in China 2013. While multinationals have kept their spend in check in recent years, with so much untapped potential in the local domestic market Source is expecting no further let up in the rate of growth.
All of the largest sectors for consulting showed strong growth in 2012 — Manufacturing (up 13.5 per cent to $793m), Financial Services (up over 10 per cent to $421m), and Energy and Resources (up over 8 per cent to $365m). The report says that within the manufacturing sector, demand for consulting is focused on consumer goods for the emerging middle class — as well as skilled manufacturing products for the export industry. Despite some low-skilled manufacturing moving to other countries (such as Vietnam and Bangladesh), this is still a significant and growing sector for consulting.
One of the other fastest growing sectors was Pharma and Biotech, with a 12.7 per cent growth to $190m. Work in this sector is being driven by investments in healthcare — driving growth in the Chinese pharmaceuticals sector, which is rapidly becoming one of the world's biggest pharmaceutical markets. Chinese companies are also now becoming significant players in the market and are looking for help with their market growth plans.
B.J Richards, a Senior Analyst at Source and author of the report commented, "The Chinese consulting market looks to remain hotly competitive for the near future, as there seems to be more consultants flocking to the market than work to support them, and increasingly sophisticated local firms threaten to join the fray. A thorough understanding of the Chinese market, a highly specialised skill set, pragmatic solutions, and far-ranging international insight will remain the most sought-after traits and therefore the best opportunities for differentiating yourself from the crowd."
Operational Improvement hits $1bn...
The most significant consulting service in China was Operational Improvement — up 13.6 per cent to more than $1bn. Due partly to the current economic situation, partly to higher costs in terms of salaries, and partly to increasing competition — firms are focusing more intently on the bottom-line. There is also interest in innovative approaches to support both growth and the efficiency agenda. Other strong consulting services in China included Technology, Strategy, and Marketing and Selling.
Opportunities and challenges
The report also discusses how to capitalise on the opportunities in the market. It says that it is a commercial imperative to open up the market amongst domestic, Chinese clients, as multinationals, which most consulting firms have come to depend on for their existence in China, are no longer the reliable sources of work they once were.