History
The history of foreign experts' involvement in China's reform can be dated back to the 1980s when economists like Joseph Stiglitz and Milton Friedman participated in discussions on China's reforms, as special advisors to the Chinese government. China has undergone massive changes in terms of using foreign talent since then. Some Chinese companies and government bodies have got over their doubts about whether Western ideas can solve China's problems, and an increasing number of Chinese companies have sought advice from foreign consulting firms.
Back then there was very small in demand of Management consulting, by the year 2000, the market demand was only around $100 Million, while the US management consulting industry market demand was $160 Billion. China was well lagged behind!
Progress
However, China has been catching up! Demand for management consulting services in China has been increasing rapidly ever since China's accession to the World Trade Organization.
In the past 15 years, the social awareness of management consulting has made great progress, due to this rapid growth. Estimates revenue for the Management Consulting industry in China has been growing at an annualized rate of 10.1% to total $14.7 billion.
Consulting firms in China enjoy high-profit margins and very limited regulations. The industry is still in the growth stage of its lifecycle, with low barriers to entry, a heavily unbalanced geographic distribution, and a low concentration level. Some firms accounted for a forecast around 20% of industry revenue in recent years. For these reasons, the Management Consulting industry is set to experience significant expansion in China's medium-sized cities.
Most of the top consulting companies in the world have now entered the China market together with their global customers. In fact, most of the top domestic companies, which are battling increasing competition from foreign firms doing business in China. Significant numbers of small- and medium-sized local consulting companies have also emerged.
Future
Chinese companies' demand for consulting firms has changed from focusing on resolving short-term business problems to working on long-term plans, including the management of the enterprises, talent strategies, and organizational structure.
The costs foreign consulting firms charge are usually eye-watering, but their plans are not always put into practice. Sometimes local governments simply disregard project plans. A government body responsible for a local development zone once hired a foreign consulting firm to do a development plan, but the completed plan was left untouched. The demand for result-oriented professional services is increasing. Strategic consulting aims only to discover problems; however practical needs tend to require solutions that can be implemented.
Benjamin Liu - Executive Search Consultant