3 Nov 2011:
Of all the emerging economies, China is arguably the most enigmatic, and hardest with which to come to terms. However, with almost 11 percent of total global trade, as reported by HSBC’s Trade Connections trade quarterly forecast report (October 2011), the sheer volume of production is forecast to make the People’s Republic the world’s largest trading nation, by value, by 2025.
The labour market is still on the move in China. Increased mobility, and increased communications – TV ownership is up twenty-fold in rural China in the last twenty years – mean more people are aware of the opportunities that the rapidly urbanising city regions have to offer.
These figures, like everything else in China, are dynamic. “The Chinese economy is still in its industrialising phase, and will probably stay in this phase until 2020,” says Jim McColl, chairman and chief executive of Scotland’s Clyde Blowers engineering firm, a delegate at the recent HSBC Trade Summit in Hamburg. His words suggest that a snapshot of China is not sufficient to inform business decisions. “You have to invest the time, you have to get to know the market. We spent three years out there just getting to know it, going to visit potential customers, and recruiting good local Chinese people to work with us as part of a team.” A handful of German manufacturers echoed those sentiments, one saying their success was down to the time they’d spent in China and another noting that China was now the biggest market for Mercedes.
The picture reveals a trend that points to increased Chinese trade within the Asia region, eagerly digesting the country’s 8% annualised economic growth. The projections given in HSBC’s Trade Connections trade forecast report (October 2011) revealed that China’s greatest trade partners for the next six months all come from within the region. Already 72% of businesses are trading with counterparts in Hong Kong, Taiwan and Macau, and nearly 70% are trading with Southeast Asia and the Rest of Asia. For Heike Foelster, senior vice president of Germanischer Lloyd SE, that means working within the region too. “We are trying to improve our business mainly in China, due to the growing market within the ship industry and the wind industry, which is the developing market.”
The government, nevertheless, is actively seeking to make overseas trade easier, with a market-facing version of the five-year plans of old. “Recently I think that most of you have heard about the Renminbi internationalisation,” notes Montgomery Ho, Managing Director and Head of Commercial Banking at HSBC China. The current economic situation, affecting traditional consumer markets most acutely, may put a temporary brake on China’s growth, but the overall trade trend is for these indicators to recover. “This is one of the measures from the Chinese government trying to reduce the cost of doing business with China, and to facilitate trade between Chinese companies and trading partners.”
The developing and fluid position makes much anecdotal comment age very quickly. Many delegates at the recent HSBC Trade Summit in Hamburg pointed to examples of their businesses growing rapidly, but now doing so in different directions to those of just a few years ago. Markets have liberalised beyond all recognition, but there is still significant restraint on free enterprise. In China, to be accepted and successful, it’s necessary to comply with quite rigorous control of business activity. “It’s much harder to get the deal done in China”, said one European fashion retailer at the Trade Summit, “but once you have you can depend on it as reliable.”
Whatever else may change in China, there’s little likelihood of overturning such ingrained attitudes. Dr Sigurd Dahrendorf, VP, Corporate Treasury, at German engineers Knorr-Bremse Group, says you have to accept the cultural differences. “You have to live with them and you have to try to build up a real partnership. Do not come as a conqueror, come as a partner.”
China may well be seen as a perilous wave on the horizon, but the most likely outcome is a wave of new consumers. They may not be coming for goods of the sort they’re already producing for the world, but have higher-minded shopping lists for luxury brands, and even the patents behind them. As one commentator puts it, “China wants to lead the world and they will win.”
Any occidental corporation should, at least, explore the opportunities presented by that tide of trade.
Click here to review the presentation given by Montgomery Ho, Managing Director and Head of Commercial Banking, HSBC China during 'Get the inside track to business in China' workshop, and click here for Dr Sigurd Dahrendorf's presentation on how Knorr-Bremse expanded into China.
Watch the speakers from the Summit sharing their hints and tips on doing business in China
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