China: Be prepared for opportunities

China: Be prepared for opportunities

Contrasts abound in China

The recent announcement by the powers that be in China that the RMB will have its pegging to the US Dollar loosened has received a mixed response from world markets. In the long-term it is safe to assume that there will be an appreciation in the value of the RMB, which will ultimately lead to increased costs of manufacture in China. When we add this to the already increasing costs of labour in China over the past two years, it is bad news for western companies looking to achieve super low cost manufacture in China. The Flip side to this is obviously that foreign products imported into China will now become more affordable. This is an indication of the gradual evolution of the Chinese market – a market that no longer is just a place of low cost manufacture, but a global marketplace in which Australian companies should be taking
advantage.

In the past decade there have been many analysts who have suggested that the Chinese economy is overheating, and that it surely can’t sustain GDP growth rates around 10% for the long term. Surely it is a bubble that is going to burst they said…. has the bubble burst? The answer to that question is a definitive NO in 2010. The GFC was as good a time as any to be the catalyst for an economic meltdown in China, particularly as the major western developed economies in North America and Europe went into economic free fall. Demand for Chinese goods from these markets would collapse, and as a consequence so would the Chinese economy collapse. This has clearly not occurred, in large part to the Chinese Governments successful economic stimulus package, as well as the growing demand for Chinese goods amongst the emerging Chinese middle class. Times are still good in China and with the Shanghai World Expo 2010 on show, China wants the world to know what opportunities lie at its doorstep.

Australian products, are generally favourably looked upon in China, China is no longer JUST the cheap manufacturing centre of the world, it is a growing and exciting market in its own right.  The emergence of the middle class in China,
has seen a demand for western products grow, shopping malls, with everyday western brands are springing up in cities all over China, from Urumqi in the North West, to Guangzhou in the South East of China. It is not just the cheap western brands like KFC and McDonald’s either, you will find malls filled with the latest HP computers, Canon and Nikon Cameras, Apple MP3 players, as well as Rolex watches,  Carrefour Shopping centres, and Nike clothing ranges. These malls are mostly filled with the real deal, not the ethically questionable counterfeit products of these same brands in China. That is not to suggest that there are not issues with counterfeit products in China, but in general they have moved on from the mainstream malls where the middle class are shopping. China is screaming out for brands and products to fill its
shelves, and Australian products hold a crucial market advantage.

Australia and China have a special relationship, due to the ongoing and necessary minerals export to China, and if you are in that industry I don’t have to tell you how keen the Chinese are for your produce! Australia is the clean, green, land of opportunity for the Chinese, and Australian companies should be leveraging this perception.  The main thing to remember with China is that it is a HUGE market, of over 1.3 Billion people, and so just about any product or industry will have a market opportunity in China. So think about how your product could appeal to a Chinese market. Do you want a piece of the action?

The challenge with China is to make sure you undertake due diligence in your investigations into the potential opportunities, while ensuring your company is managing your risk. China can be a daunting place, and many companies have been ripped off by not preparing correctly before entering the market.  The Scout motto of Be Prepared is a good motto to consider for business in China. Once you’re prepared then China definitely is Open for Business.

By Nathan Gray (TACDC’s cross cultural advisor) from his blog Navigating a Multi-Cultural Globe