By Chris Cotton, Director of the China-Britain Business Council
China has made massive economic progress over the last three decades, is now the world's second largest economy and is currently the UK’s 9th largest export market. Figures may already seem impressive - in 2010, the UK exported £7.2 billion worth of goods and services to China and overall UK exports to China increased by 41% but, given that it is the second largest world economy, the opportunities in China are extensive and there is clearly significant room for improvement from UK companies.
Key drivers for opportunity for the UK
To understand the opportunities for British products and services, you need to understand some of the key characteristics and aims that China has set itself:
Size, scope and speed of growth — planned growth of 7% is robust given that this is already the second 2nd largest economy in the world.
Rise of regional cities — the rapid growth and emergence of regional cities (see below) is transforming the Chinese marketplace into a vast and dynamic network of regional markets and industry clusters.
China outbound investments ‘Going Global’ — outward foreign direct investment (FDI) from China is increasing rapidly. This means growing opportunities for partnerships between UK and Chinese businesses.
Moving up the value-chain — the development of technology-led sectors and high-value capabilities has become a key policy focus for the Chinese government. The UK is the sixth largest manufacturing nation in the world and our advanced engineering expertise is outstanding. The scope for cooperation is significant.
Addressing environmental issues — China has set the target of achieving more sustainable growth through increasing energy efficiency and improving environmental protection. China is the largest export market for UK Low Carbon goods and services, and will continue to offer good opportunities.
Ongoing government reforms — China continues to undergo major reforms to transform its economy. Reform of public services will generate new opportunities in a range of sectors, including healthcare, education, financial services and agriculture.
Location, location, location - look beyond the obvious
In terms of where to find these opportunities, most UK companies have heard of the major Chinese cities such as Beijing, Shanghai and Guangzhou, yet China has almost 300 cities with a population of over 1 million — and they are all looking to expand, develop and modernise. This has been and continues to be a key driver of the Chinese government — to spread wealth and opportunity across China.
The China-Britain Business Council (CBBC) is currently conducting a significant piece of research, commissioned by UK Trade & Investment (UKTI) into this area which will be published in July. This work builds on an earlier research project which highlighted opportunities for UK companies in 35 of China’s leading regional cities. These 35 cities all shared characteristics including rapid economic growth, low production bases, large and developing, relatively unexploited new markets.
The new research - focussing on Rail, Air, Automotive, the Built Environment, Healthcare, Education, Energy and Retail - is already showing that many of these regional cities are now receiving a higher proportion of foreign investment than the larger cities and have been enjoying significantly higher growth rates.
It is also showing how the development of transport systems is linking cities ever closer together, creating clusters where companies can access a range of cities from one city within each cluster. These clusters are inter connected with new high speed rail, and the formation of national air hubs are creating northern, central, eastern, western and southwest zones connecting the hubs and accelerating the progress to the west.
The information provided within these reports will assist companies to think strategically about how to enter and develop their business in China.
China’s future potential
The economy has continued to register solid growth of 8-10%, despite the weak global economic environment. The momentum of the economy has been sustained by the major government stimulus package and growing consumer demand.
China’s 12th Five Year Plan for the period 2011 to 2015 has recently been approved by the Chinese Government. This five year period is seen as critical for accelerating the transformation of economic development and sees continued commitment to the ongoing reform and opening up of the economy. The plan balances the need for continued strong growth - albeit at a slightly lower level of 7-8% p.a. over the period - with the quality and efficiency of such growth.
Key features of the plan that will drive commercial opportunity include:
boosting domestic demand
growing the services sector
improved urban-rural and regional development
the use of science and technology and innovation
major reductions in energy consumption and emissions
improving the environment
reform of public services
upgrading manufacturing capability
development of new strategic industries
Do your research
So, the opportunities are there but companies need to be well-prepared in order to succeed in an increasingly competitive although potentially very rewarding market. Companies would be well-advised to commission further research specifically tailored to assessing the market for their specific product or service and to consider the optimal market entry strategy for their business. Through CBBC and UKTI, companies can access a range of services to assist them in this process. For example, initial market research can be commissioned through UKTI’s team of International Business Advisers located across the country, which will be delivered by CBBC in China.
For companies wishing to establish a presence in the market CBBC offers a number of solutions. For example, for companies not yet registered in China, the Launchpad scheme enables companies to have a dedicated Chinese project manager based in a CBBC office in China until such time as they wish to establish their own company.
British companies are doing well in China — but we could be doing so much more. The window of opportunity will not be open forever and, if we don’t take advantage, you can be sure that others will.
About the China-Britain Business Council (CBBC)
CBBC is the largest membership organisation for UK companies doing business in China and offers a comprehensive range of information, consultancy, advice and services for all British businesses at all stages of market entry. Our services are designed to help companies develop a sound business strategy and enter the market in a timely, cost effective manner while managing risks.
CBBC has a proven track record of successfully developing British trade in China dating back to the 1950s. CBBC is widely recognised and respected at the highest level of both the Chinese and British Governments. CBBC is UK Trade and Investment’s (UKTI) delivery partner for a range of services and works closely with UKTI for the benefit of UK Plc.
For more information, visit: www.cbbc.org