China-based multinationals to lose out to domestic rivals as small cities drive growth as mainland economy slows

Multinationals on the mainland will continue to lose out to domestic companies as the country enters a "new normal" period of economic slowdown, said management consultancy firm Bain & Company.

Local companies, typically led by entrepreneurs, were often more efficient at making decisions and - more importantly - had a stronger presence in smaller cities where most future growth would be located, said Michael Thorneman, head of Bain's Greater China office.

"On an aggregate level, multinationals are losing share, though there are individually some sectors where they're doing better," he told the Sunday Morning Post on the sidelines of the World Economic Forum in the city of Dalian in Liaoning province, which ended on Friday.

This trend was likely to continue because multinationals generally faced slower growth in most industries, increased costs and greater volatility, Thorneman said.

"Multinationals have historically a stronger presence focused on higher-tier cities … but the growth is now increasingly in the lower-tier cities," he said.

According to the latest report by the China Society of Urban Studies, small- and medium-sized cities contributed about 57 per cent of the mainland's gross domestic product in 2013.

Thorneman said that local companies were typically driven by entrepreneurs so they were fast at making decisions.