Mind Consulting’s China Gap
- Kennedy Editorial
- Feb 12
- 3 min read
By Nathan Simon, Partner at Kennedy Intelligence - Consulting Industry's Trusted Partner for Research and Advisory Services. I Co-Author the Consulting Navigator.
Trade policy is frontpage news again. Many consulting leaders are asking us how different tariff scenarios could impact demand for different consulting services. The greatest impact of trade policy isn’t a matter of conjecture. It already happened.
Pre-Covid, consulting spending in China had grown at more than double the rate of the global consulting market. Going into 2020, spending in China was on track to grow by nearly 80 percent over the next five years. Instead, Covid and geopolitics slammed on the brakes. Our 2024 estimate for consulting spending in China is one-third less than the pre-Covid trend would have predicted. What’s more, this gap is continuing to grow as spending in China stagnated in 2024 and is forecasted to lag global consulting growth in 2025.
From China’s entry to the WTO in 2001 through the middle of the last decade, the East-West trade and investment engine had powered growth in global foreign investment flows by a factor of 2.5 and tripled merchandise trade volumes. Then China launched its “Made in China 2025” strategy in 2015, and the subsequent escalation of U.S.-China trade and geopolitical tensions from rhetoric to action in early 2018 set in motion forces amplified by Covid, Russia’s invasion of Ukraine, and other conflicts that unbalanced that growth engine. It was, to borrow a line from the Austrian writer Alexander Lernet-Hornia, “like a kitten playing with knitting needles stuck in a ball of wool, [that] tugged at the earth’s axis and pulled it out of line.” And pulled consulting markets out of line along with the rest of the trading system.
Many point to China’s restrictive Covid lockdown and crackdown on technology and other companies (including consultancies) to argue that the downturn in China’s consulting market was a particular case rather than a general trend. There is some truth to this insofar as global consulting spending, in contrast to China’s, did bounce back, exceeding its predicted pre- Covid trend by 2022.
But we believe what happened to consulting in China post-Covid was a harbinger of two important contributors to the current slowdown in global consulting markets.
The transience of trade divergence as a backup power for consulting growth.
Mirroring investments in China a decade earlier, consultancies from Bain, BCG, and Kearney to AlixPartners and Alvarez & Marsal to EY and PwC made investments over the past two years to extend their footprints in Southeast Asia. While it was the fastest growing region for consulting spending in 2021 and 2022, spending growth trended down over the past two years. We’re forecasting growth in the region this year will again lag the global rate as new trade policies constrict what had been a bypass valve for the China trade. Instead, the bulk consulting growth over the next couple of years is likely to be in the mature North American and European markets, which feeds into the second contributor to a slowdown.
The politicization of consulting in an era of economic nationalism.
Despite its reputation for secrecy, the consulting business is built on openness: both the micro-level openness to share best practices across industries and economies and the macro-level openness of free trade and investment flows to power economic growth (and consulting along with it). Consulting business models and cultures are the consummate globalists. It’s also a business that is tightly bound up with the public sector, which makes up over 15% of the global consulting market. Adapting to an era of economic nationalism will not only crimp growth, but it will also strain the very culture of consulting.
The sputtering East-West trade and investment engine may have started as an isolated problem for consulting in China, but it’s turning into a global problem for the entire consulting industry.
Check out our forthcoming Consulting Navigator report for the full story.
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Please note: This article is for educational and informational purposes only and does not constitute investment, tax, or legal advice. The intelligence has been gathered from a variety of public and non-publicly available sources. The views and opinions expressed in this article are those of the author and do not represent the views of any affiliate organization. Any opinions or views expressed are as of the date written and are subject to change without notice and may be updated or modified at any time.
