Post-crisis, Asia will benefit

Editor's Note: The global financial crisis is likely to usher in fundamental changes in many industries. Industry insiders are looking for clues about what the economic landscape will look like after the crisis.

Hans-Paul Buerkner, global chief of The Boston Consulting Group, talked to China Daily reporter Wang Bo during his recent visit to Beijing.

The 56-year-old CEO shared his views about the post-crisis global industrial landscape and corporate management in an uncertain economic environment.

Q: How would you describe where we are today?

A: We certainly reached the bottom somewhere in the middle of the year, and now we are in an upward movement, even though there are still plenty of uncertainties around. However, pictures of the economic recovery are quite different in various regions.

China and Asia overall did not have a recession. Economic growth here was down, but it has picked up significantly so far. In Europe and North America, the economy has reached the bottom and is now moving upward, but at a much slower pace.

Q: What does it mean for chief executive officers?

A: The key element is to make sure CEOs have done their homework. They have to cut unnecessary costs, restructure their business portfolio and give up or sell off non-strategic activities. Some companies are doing that, but some need to do more work.

Those who have done their homework will have great opportunity to look beyond the crisis and emerge from the crisis as a winner.

There is a chance for these companies to fundamentally reposition themselves and reshape the industry's landscape by making acquisitions, and by taking customers, assets and talent away from competitors that are showing weaknesses.

Q: What will the global economic landscape look like after the financial crisis?

A: The global movement from West to East and from North to South will accelerate.

Evidence for such a long-term trend can be found from a demographic point of view

In Asia, which maintained robust momentum for population growth, people want to have a higher standard of living in the future. Their expectations and their willingness to invest in the future are very different from what we see from the European markets.

The older populations in the West are more concerned about preserving their status quo, and they are more skeptical about the future. These different attitudes show that the dynamic in the emerging markets is much stronger. It was the case before the crisis and will continue to be the case after the crisis.

On the industrial front, we will see fundamental changes taking place in almost all industries, especially those with over-capacities, such as the airline and automotive industries.

Q: In what ways will leading industrial players reshape the market? Is it a good time to think about mergers and acquisitions?

A: We expect merger and acquisition activities to increase significantly in 2010 and 2011, since many companies are trying to seize the opportunity to make major changes in their market position.

In 2007 and even at the beginning of 2008, when the valuation of assets around the world was extremely high, we very often told our clients who were looking at potential acquisitions that the deals did not make much sense.

At that price, generating synergies and creating values were almost impossible. But now when the share prices have come down significantly, this is a good time to look at those targets again.

Q: What changes will the global financial crisis bring to the financial industry? Will it bring unique opportunities for Chinese banks?

A: We already saw a number of players go out of business. Looking ahead, we will see more banks and financial institutions having to clean up their balance sheets and downsize significantly. The process of becoming a lot smaller is under way.

The regulatory environment will definitely become strict. In addition, the key element is to have prudent risk management within bank.

In China, local banks have strong retail and corporate base. As for overseas acquisitions, if the banks think they could do everything globally just because they are large domestically, they would run risks. Simply translating what they already know at home into other markets will not be doable as consumers and corporations in North America or Africa are different. Going forward, we therefore expect local banks to prepare themselves thoroughly and clearly distinguish different opportunities regarding to their potentials and risks.

 (China Daily 12/05/2009 page2)