Foresight 2025 Roland Berger China Annual Trends Report

By Denis Depoux

As part of our long-standing tradition, we are delighted to introduce our latest annual flagship report "Foresight 2025: Roland Berger China Annual Trends Report" (hereafter referred to as "Report") at the beginning of 2025. Based on our long-term observations and extensive research conducted by our experts across various industries, this report provides trend analysis and in-depth insights into key industries, such as Automotive, Chemicals and Materials, Civil Economics, Consumer Goods and Retail, Energy and Utilities, Industrial Products and Services, Pharma and Healthcare, and Technology and Internet. Additionally, this year's report delves into several major hot topics, including globalization, artificial intelligence, industrial modernization and automation, internationalization, new quality productive force, and sustainability, aiming to stimulating thought and providing valuable insights to industry stakeholders.

Globalization – navigating the complexity

Today, the old paradigm of globalization is gone, while it continues to evolve, shaped by the ever-growing complexity of international relationships. The new features of globalization add layers of complexities and difficulties for companies operating globally. Balancing between economic interest and regulatory compliance has become a crucial challenge for many multinational companies.

Looking forward, a more VUCA world is there to stay. In this context, it is imperative for nations and companies to clearly comprehend the evolving dynamics of globalization. More importantly, the new globalization paradigm necessitates transformational efforts from both countries and businesses to effectively harness new competitive advantages with agility and to mitigate or avoid associated risks.

Right time to make Al strategies as adoption accelerates

Artificial Intelligence (AI) will ultimately transform every aspect of human life, work and society. This has become a widely held consensus. The question is: when will this day arrive? For a long time, AI's implementation has lagged people's expectation. However, the exponential growth of AI generated content (AIGC) technology at the end of 2022 has significantly accelerated the progress.

We expect more applications powered by large language models (LLM) will be released and quickly mature. The integration of software and hardware will also unlock more AI application scenarios. For businesses, AI is no longer a niche topic. Senior business leaders must include AI into their corporate strategies as soon as possible. To better prepare for the large-scale implementation of AI applications in the future, businesses should establish robust data asset management and supervision governance frameworks.

New frontier of Chinese manufacturing: global force

In its "Foresight 2024" report, Roland Berger identified five transformative trends reshaping global manufacturing: network optimization, supply chain development, digital transformation, sustainable development, and manufacturing-on-demand platforms. These trends have been decisively validated throughout 2024 amid significant changes in global supply chain dynamics. Most notably, digital transformation has emerged as a dominant force, with 85% of global supply chain leaders implementing AI and IoT technologies. The Red Sea crisis, triggering unprecedented shipping disruptions and cost increases, alongside persistent inflationary pressures, has further emphasized the critical importance of supply chain diversification.

Chinese manufacturers have demonstrated remarkable adaptability to these global challenges. They have achieved significant breakthroughs in both technological advancement and global expansion, developing sophisticated industrial automation capabilities while establishing strategic production facilities across Vietnam, Mexico, and Eastern Europe. This successful adaptation validates previous forecasts and reinforces Chinese manufacturers' strengthening position in global value chains.

Looking toward 2025, five strategic imperatives will shape next-generation manufacturing:

First, supply chain resilience has become existential - companies must develop multi-regional manufacturing capabilities while protecting core technological advantages. Global expansion is no longer optional but essential for survival in an increasingly competitive marketplace.

Second, sustainability must transition from commitment to action, with green manufacturing principles becoming integral to production processes.

Third, cross-regional partnerships must be strengthened to ensure supply chain stability and market access, supported by continuous advancement in digital transformation, international collaboration, and technological innovation.

Fourth, organizations must evolve from implementing isolated digital solutions to pursuing enterprise-wide transformation, requiring substantial investment in AI and IoT technologies.

Finally, manufacturers must elevate their positions in high-tech value chains through intensified R&D investment and breakthrough innovation.

Going global enables Chinese companies to become world-class players

Despite the complex changes in the international environment, Chinese companies are persistently pursing the opportunity of global expansion. Going global has become an indispensable new growth engine for them.

The overall going global scale of Chinese companies has reached a new height. In the first three quarters of 2024, China's total export value reached 18.26 trillion yuan (US$2.52 trillion), 6.2% higher than a year ago. The mix of exported product keeps the upgrading trend. Electrical machinery exports contributed 59.3% of the total value, while advanced equipment (up 43.4%), integrated circuit (22.0%) and automobile (22.5%) all posted significant growth. Besides, Chinese companies were proactively investing in overseas markets. In the first three quarters, China's non-financial outbound investment reached US$106.46 billion, 10.9% higher than a year ago. The scale of China's overseas investment, which covered more than 80% of all countries and regions, has ranked among the top three in the world for 12 consecutive years.

Leading Chinese companies' overseas businesses have been growing. After nearly two decades of globalization, some leading Chinese firms have seen their overseas business contributing more than 50% of their total revenue, with profitability also gradually increasing. At the same time, overseas operations have created new profit pools to help them ward off fluctuations and price competition pressure in the domestic market. These companies have established a positive cycle between their domestic and overseas business units, in which the overseas business can in turn support domestic market operations.

Breaking new ground: winning formula of new quality productive force

In 2024, many industries in China were trapped in "involution", where businesses were involved in intensive competitions and price wars, losing profitability. Companies had to overcome challenges just to survive. Looking forward to 2025, business leaders have to foster their own new quality productive force to build distinctive competitiveness. Their success in doing so will ultimately determine the fate of their businesses in the new reality.

The Chinese market has huge demand for numerous products and services. However, the supply side capacity is equally gigantic. Companies are prone to get mired in the quagmire of homogeneous competition and become commoditized. To prevent "new quality productive force" from becoming the next red ocean, companies should analyze their industry environment and leverage their unique strengths to develop meaningful, differentiated, and competitive "new quality productive forces" tailored to their specific needs.

This concept has been defined by this formula: new quality productive force = (science and technology revolutionary breakthroughs + factors of production innovative arrangement + industries in-depth transformation and upgrading) x (labour force + tools + subject of labour) optimized combination. We have summarized some key points to help companies upgrade operational efficiency, build distinctive advantages, avoid the trap of involution, and win by leveraging the new quality productive force.

New stage for corporate sustainability transition and green investment

As the global political and economic landscape becomes increasingly complex in 2025, businesses will face a more challenging competitive environment. At the same time, the progress of sustainability has raised expectations from clients, regulators, markets, investors and other stakeholders on this issue, making ESG (Environmental, Social, and Governance) performance a key metric to measure a company's competitiveness. Roland Berger believes that, to capitalize on sustainability trends and ensure long-term success, businesses should adopt a systematic approach to understand the intricate relationship between ESG and their own growth. Only by integrating ESG principles into their strategies and operations, and building robust ESG management capabilities, can businesses position themselves for a thriving future.

Automotive

Looking back at China's automotive industry in 2024, automakers in the market faced intensified local competitions amid a mega wave of transformation. Price wars emerged, new models proliferated at a dizzying pace, technologies underwent rapid iterations, and consumer segments grew increasingly diverse. These dynamics presented significant challenges for industry executives in decision-making efficiency and profitability concern.

However, it is undeniable that this turbulent environment has also nurtured several milestone breakthroughs: the monthly penetration rate of new energy vehicles (NEVs) exceeded 50% for the first time, Chinese brands secured over 60% of domestic market share, and China solidified its position as the world's largest automobile exporter. These three record-breaking events manifested significant breakthroughs in the transformation of China's automotive industry.

In retrospect, the global automotive landscape also underwent remarkable changes in 2024. The shifting international order posed major challenges to Chinese automakers' globalization journey. The polarizing of power balance brought unprecedented uncertainties; the rise of trade protectionism created unexpected market access barriers; and regional divergence in technological roadmaps led to different readiness to accept new technologies across various markets. Nevertheless, Chinese automakers and component suppliers, who have been toughened by the intensive domestic competition, accelerated their integration into global value chain by offering products and brand experiences that deliver superior quality, value, and innovation.

Looking ahead, 2025 is destined to be an even more extraordinary year. The domestic competition will continue to ruthlessly eliminate weaker players, while the global landscape remains intricate and volatile. Although the automotive industry's transformation is a "marathon" in the long run , addressing the short-term uncertainties of 2025 is a pressing concern for every automotive industry leader. From the perspective of industry observers, Roland Berger automotive team has identified six key trends for 2025. These trends will not only impact individual sectors, but will also holistically influence all participants across the entire ecosystem.

Civil economics

Three major trends of 2024 laid the groundwork for the development of 2025. First of all, the emergence of the extended BRICS cooperation began to reshape the economic globalization pattern of the Global South. Global capital flowed into China in new forms and new models.

Secondly, after the concept system of "new quality productive forces" was introduced, technological innovation and industrial innovation accelerated their integration. The structural transformation of the industrial development momentum has further accelerated.

Last but not least, the Third Plenary Session of the 20th CPC Central Committee announced that China will further deepen reform comprehensively. The industrial competition between China's various regions began to form a new pattern based on comprehensive competitiveness. Major Chinese cities are entering a new stage of chasing development from existing assets and seek growth from operations.

Consumer goods & retail

It seemed that the Chinese consumer goods and retail industry underwent an even tougher year in 2024 than in 2023. The term "fixed size market" applied not only to durable goods sectors affected by the real estate market slowdown, but also permeated nearly all consumer sectors. Amidst current economic headwinds, brands that can buck the trend and achieve growth are nothing short of heroic. Many high-end brands, in particular, have experienced unprecedented declines. The business strategy of going global, once seen as a promising solution, is now clouded by geopolitical uncertainties. Encouragingly, despite the persistent challenging market conditions, consumer goods and retail companies have ditched the wait-and-see approach which they held in 2023, and are actively seeking ways to increase revenue and profit.

The situation varies significantly across different sectors. The cyclical fluctuations in the pork and beef markets have resulted in varying conditions across the high-protein industry. The food and beverage industry has benefited significantly from the revival of out-of-home consumption. However, the growth of fashion luxury brands is constrained by both the slowing growth of domestic high-income groups and the increase in outbound tourism. Total solution providers in home renovation market remain popular, while home appliance companies have achieved significant growth through overseas expansion. In the grocery retail sector, both Pandonglai and Aldi were the talk of the town in the retail industry of 2024.

Looking forward to 2025, despite the increasingly complex geopolitical landscape and heightened international tensions, we remain confident that China, backed by its resilient economy and visionary policymakers, will successfully transition towards a domestic consumption-driven growth economy. Consumer demands will continue to polarize and become increasingly complex, requiring brands to develop stronger strategic insights and more agile adaptability. As we go deeper into the fixed size market era, weaker players will be eliminated and enterprises with end-to-end operational capabilities will be better positioned to dominate the market. In this article, we share our humble opinions to stimulate thoughts on how businesses can seize opportunities and thrive in the challenging environment.

Industrial products & services

In 2024, the increasing complexity of the global economy and politics has presented unprecedented challenges to China's manufacturing industry. As the geopolitical landscape and international supply chains continue to restructure, complex changes and uncertainties are impacting China's industrial goods market. More and more leading companies, after a brief period of adjustment, have correctly interpreted the positive economic policies and gradually clarified uncertainties, beginning to proactively plan and seize development opportunities in 2025.

In an era marked by rapid change and abundant opportunities, Chinese enterprises should strive to expand overseas and improve internal governance as two major directions for future development. With intense domestic market competition, manufacturing enterprises should actively expand overseas, accelerate global expansion, and enhance their responsiveness and service capabilities for the international market.

Meanwhile, Chinese companies should also improve their internal governance efficiency and transparency. The old growth model that relied on low costs and economies of scale is no longer sufficient to win today's market competition. Companies need to tap into their potential and build differentiated competitive advantages. All of this starts with a clear understanding of one's own strengths and weakness. Old practices such as "grey-area management", "partial contracting", and "functional independence", while once creating management efficiency, have also resulted in a less than transparent governance corporate framework. When the market was in a phase of rapid development, profit margins were high, so these issues did not receive sufficient attention from business leaders. However, now that China's economy has entered a new normal and market competition intensified, profit margins have declined. More leaders have realized that the old, extensive management methods increased internal costs and limited their ability to obtain agile internal insights.

Businesses need to establish transparency based on information and data to lay the analytical foundation for further operational efficiency improvement. To achieve this, two prerequisites must be met: firstly, building a transparent and efficient governance structure to ensure the smooth operation of various internal regulations; and secondly, rapidly improving the level of digitalization and adoption of AI to equip the company with corresponding technologies. When business leaders face uncertainty internally, it is imperative for them to ensure that their companies can survive in high-level competition over the long term.

Looking ahead to 2025, as more Chinese companies rise in the global stage, both outward expansion and inward governance improvements not only demonstrate strategic wisdom in the present but also initiate a chapter of exploration toward the future. In this journey, every step represents an exploration and foresight into future possibilities.

Chemicals & materials

Looking ahead to 2025, China's chemical industry is poised for steady growth. We expect four primary drivers to fuel its growth: domestic companies' acquisition of quality international assets, technology-driven domestic substitution, enhancements in corporate governance and management, and the application of artificial intelligence to bolster long-term competitive advantage. We anticipate that following a new phase of consolidation and innovation, the Chinese chemical industry will reach new heights in its development.

Energy & utilities

In 2024, the global macroeconomic landscape was marked by significant turbulence, with geopolitical tensions escalating and domestic economic transformation leading to ongoing challenges. Economic growth faced mounting pressure from both cyclical and structural factors.

However, concerted efforts from policymakers and market forces have gradually stabilized the economy, while the emergence of new quality productive forces is accelerating. Electricity consumption, one of the key measurement indicators of the "Li Keqiang index", is expected to grow nearly 8% in 2024 from a year ago, surpassing rate of GDP growth.

This reflects the electrification and decarbonization efforts have penetrated into more aspects of China, with especially rapid electricity consumption growth in many sectors, such as electric vehicles, AI computing power, and emerging services. The reshaping of the energy landscape during the upcoming 15th Five-Year Plan is looming on the horizon, starting from the consumption end.

In the near future, China will enter a critical phase of establishing a new electricity system and a next-generation energy industry system. Supply-side reform will remain the focal point. The conventional growth model driven by capital investment will become unsustainable due to overcapacity and declining returns. Energy and utility companies will have to solve three major challenges, i.e., undertaking capacity optimization and technological innovation, balancing low-carbon transition with economic growth, and resolving global expansion and local protection conflicts.

We've identified five key trends in the industry to help companies chart a course, identify opportunities, craft strategies, and open a new chapter.

Technology & internet

In 2024, China's technology and internet industries further enhanced their sustainable development capabilities and competitiveness. On one hand, new quality productive forces, most typical example of which is AI large model, have thrived throughout the year, injecting new growth momentum into technology industries. On the other hand, significant strides in domestic root technologies, including semiconductors and operating systems, are providing new avenues for consumers, businesses, and industry participants.

Looking forward to 2025, new breakthroughs in root technologies, preferential industry policies and other factors will further boost the development of technology industries in China. We expect there will be three major trends in 2025, i.e., the wider adoption of enabling technologies, the emergence of full-stack product innovations and the globalization of technology ecosystems.

Firstly, new ICT technologies in storage, computing power, network, cloud, decentralized computing and mobile applications will be adopted in more diversified scenarios to serve the general public. They will help improve the public's well-being and the governance of societies. Secondly, the technology companies' product innovation focus will evolve from single-product breakthroughs to the full-stack coordination. Last but not least, from root technology companies to application developers and solution providers, all must be deeply ingrained in the industries they serve. This is a critical factor in the success of their globalization strategies.

Pharma & healthcare

In 2024, the impact of the COVID-19 pandemic has gradually faded into the background, while from a global perspective, macroeconomic recovery is still on a weak footing. In addition to the Russia-Ukraine war and the Palestine-Israel war, many countries and regions around the world are mired in geopolitical tensions. The global protectionism is on the rise. All these factors brought significant impacts on the pharma and healthcare industry.

In China, the reform of the medical and health system is going deeper. The policy support for innovation in the biopharmaceutical and medical devices industries remains strong. Central and local government's policies and supervision on supply, payment, and industry development are constantly improving. As consumers' medical and health awareness and behavioural habits change, they have more diversified and specific needs, driving industry players to continuously improve and innovate products and services.

Looking ahead to 2025, we believe that even though there are various macroeconomic challenges, China's healthcare and medical industry still has many opportunities for transformation and upgrading. How to improve the quality of industry development and better meet the medical and health needs will become the common goal of all industry stakeholders.

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