Posted by

Nora Senior, President, British Chambers of Commerce

13 Dec 2013

I was honoured to have been invited to accompany the Prime Minister’s trade mission to China last week.  Three intensive days of meetings, networking, and building knowledge while travelling to Beijing, Shanghai and Chengdu meant I was able to experience firsthand the sheer scale of the fast and furious developmentand the urbanisation that is going on in the country. This  certainly opened my eyes to the real potential of this territory.

China has experienced astounding growth over the past three decades – averaging almost 10% per annum.  Much of this growth has been built on low cost manufacturing and export as well as massive government investment in infrastructure projects. Although economic growth is ‘slowing down’ currently, China still creates the equivalent of a country the size of Greece every three months.

China is urbanising at an unprecedented rate.  Almost the same size as Europe with twice the population, it is not a single national market but rather a varied region made up of over 30 different provinces and municipalities.  It currently has 102 cities where the population is more than one million, compared to 35 in Europe.  And the number of ‘megacities’ (population of over 10 million) is expected to quadruple to eight by 2025. 

The Chinese government has set specific targets to double GDP per capita by 2020 and China’s growing middle class is set reach over 600 million people in the same timeframe.  The number of households in China with an annual disposable income above $10,000 will almost quadruple from 57.1 million to 222 million. As a result there has been a shift towards consumption-orientated growth, and Chinese import demand is expected to dwarf other emerging powers. Good news for the UK, then, as it is well positioned to benefit from these trends and to meet the demand for high quality goods and services.

Rather than focus on reducing GDP, commentators should look at what China is consuming rather than producing. If China consumes more than it produces then this will benefit more companies in the UK. 

There are a number of key sectors where there are obvious opportunities. State-owned enterprises will continue to play the lead role in the economy, but market pricing will be opened up to more competitive tendering, and could see an opening up of markets to private sector players in areas such as finance, energy, transportation, telecoms and public services. Education, culture and medical sectors will be opened up to multinationals, while restrictions on childcare, care for the elderly, architectural design, accounting and auditing, commerce and logistics, electronic commerce and other services will be eased. Chinese consumption of information products and services is expected to grow at an annual rate of at least 20%, so technology companies will benefit from the opportunity for new product offerings in internet finance, internet media and e-commerce. Plus, while the disposable income of the growing middle class increases there will be much many more opportunities for luxury and youth branded goods and services.  And of course green tech and smart cities. Sustainable energy and low carbon schemes will be an integral part of development as China endeavours to stave off the effects of pollution and smog as the country develops its 21st century industrial strategy.

China’s vast and varied markets are generating huge opportunities.  Last month, China made some strategic choices when it announced the outcomes of the ‘Third Plenum’ meeting of the 18th Congress of the Chinese Communist Party. Commitment to trade was integral.

But in order for UK companies to succeed in China, they must carefully plan their business model and execute their plans carefully and effectively.

Working with the British Chambers of Commerce and Chamber of Commerce Network as their first port of call, SME businesses can benefit from assistance with entry into China as a new export market, including introductions to potential clients, agents, distributors and in-market UK networks, in addition to providing tailored training on the local business environment.

As part of the Overseas Business Networks programme – a strong partnership between the BCC and UKTI to establish a robust and practical business to business network in key markets and the world - initiative, the British Business Embassy and China British Business Council are the ‘go to’ in country organisations to help UK businesses maximise opportunities and deliver on the ground connections and partners.

UK companies of all sizes should be bold and ambitious in building stronger links with China, the world’s largest and fastest growing emerging economy. Reform will be slow, steady and incremental but as China rebalances its economy, there will be strong growth potential in service exports in the sectors where the UK has a distinct advantage.

If UK businesses want to be truly global, they cannot afford not to be part of this.