Paul Laudicina, managing officer and chairman of the board with the US management consultancy A.T. Kearney, said by 2020 the world will add 1 billion people with an annual purchasing power parity of US$10,000. That will mean a middle class of 2.3 billion people, 31 per cent of the world's total population.

profile: Paul Laudicina is Managing Officer and Chairman of the Board at A.T. Kearney. He is the seventh person to lead the firm in its 80-year history. Paul joined the firm in 1991 and was the founder and chairman of A.T. Kearney's Global Business Policy Council, which is among the consulting industry's longest-standing strategic services for CEOs. He has more than 25 years of global consulting and management experience in industry, government and research institutions.

Out of the 1 billion new middle class spenders, 90 per cent will be from developing countries, 620 million of which will be Chinese.

"That's why you have the volume of foreign direct investment (FDI) increasing here, because China is going to become the world's biggest market, not just the world's biggest factory," said Laudicina, who was selected by Consulting Magazine as one of the world's 20 most influential consultants last year.

China has ranked No 1 on A.T. Kearney's Foreign Direct Investment Confidence Index since 2002, and its score reached a record high of 2.1917 on a scale from 0 to 3 in 2005.

"You cannot operate successfully unless you are prepared to change with the environment," said Laudicina on his first trip to China after being elected as chairman and managing officer of the consultancy in September.

One way to do that is to see what challenges the country has and help it address those issues, he said.

China, which has grown into the world's fourth largest economy mainly due to explosive development in the manufacturing industry, faces challenges of rising labour costs, shortage of resources, and an environmental bottleneck. Growth in service industries and enlargement of the number of affluent people are keys for China to achieve sustained growth in the coming years.

From 1985, while the world's manufacturing jobs declined 11 per cent, China's fell by 15 per cent, due to technological innovations, Laudicina noted.

For many multinationals, China is made up of two radically different markets: In eastern coastal regions, it is as developed as some mature markets; in rural and inland regions, it is more of a typical emerging market.

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