I asked my colleagues in frog design's Shanghai studio about their perspective on the current economic downturn, and here's what they wrote back:
"The US may be the initiator of this round of global economic recession but it may not be the final payer. China's economy is about to suffer as well - and in more ways than one.
And yet, the people who have been around the longest know not to pay too much attention to one-direction comments. They know that the sufferers will always shout much louder than the beneficiaries. They also know that there are ways to take advantage of the economic downturn.
In China, the rule of the game is always "Stay One Step Ahead of Your Competitors." There are some companies in this country - mostly the ones that operate domestically only - that will remain silent. Culturally it's what they've always done and what they always will do when facing these situations. Other companies will be more pro-active.
For example, when Chinese businesses run out of initiatives in which to invest their capital or when their investments stop growing (which is happening in stocks and real estate, two markets that have yielded big returns in recent years), they make a concerted effort to get back to the basics and invest in research and development. In fact, senior executives in some companies have said publicly that in the near future they would either invest in their own health and personal happiness, or they would increase R&D budgets in their businesses to invest in better products to prepare for a new run when the downturn ends.
This may be a survival strategy - that is, a strategy shift from the short term to the long term - but surviving a crisis is better than suffering from it. While the current crisis is eliminating big and small market players still trying to eke out short term gains in the form of cost cutting measures, the survivors will ride out the crisis while positioning themselves to win in the long term. The economic recession in Hong Kong fifteen years ago is a great example. In 1993, business opportunity in Shanghai was largely non-existent, but that didn't stop one Hong Kong property developer from buying cheap land and developing it in the center of the city. He envisioned Shanghai as the hub of Asia and the future of China, and he turned out to be right. He now owns several of the buildings in the heart of the Central Business District. The real estate developer's strategic long-term vision not only saved his company from the economic recession in Hong Kong, it also made him one of the biggest market players in the mainland property market.
So, while big global marketers withdraw themselves from the game, Chinese brands have a good opportunity to step up by investing money in R&D and product innovation, which will bring to market world-class products. The entrepreneur spirit always involves a combination of risk taking and long-term strategic planning, and indeed, the Chinese people have proven themselves and excelled as entrepreneurs. The reformation opened China's door to the world, and the skyrocketing economy created a Chinese "Gold Rush" that lured the world to underpriced real estate, amenable trade laws, and a surge of capital into the stock market. Now the challenge for Chinese entrepreneurs is finding opportunity in more unconventional places.
It could be that in the coming months and years, businesses in China will reinforce the domestic market as a way to fend off the global reverberations from the economic downturn. Domestic companies could add Western assets at a good value. More importantly, though, China can leverage the economic gains it has made over the past ten years into more investments in domestic R&D and innovation. This puts a premium on vision and strategic planning instead of short-term financial risk taking, and ultimately, that's going to benefit everyone, even as some will suffer now."