A Prudent Approach Is Key to Leveraging the China Opportunity
China has a population of 1.4 billion, representing hundreds of millions of consumers. As the world’s second-largest economy continues its unique growth story, the Chinese consumer’s buying power is increasing, and so is the world’s desire to tap into that revenue potential. Accessing and successfully navigating this unique market, however, requires a refined and sophisticated approach, central to which should be a sound route-to-market strategy. African exporters’ success in China has grown gradually as they have been able to leverage the increased Chinese presence on the African continent. But there remains plenty of room for improvement, and significant scope for African exporters to truly capitalize on the opportunity China represents. What can African exporters further leverage to execute the routeto-market strategy successfully?
China has been Africa’s largest trading partner for over a decade, with numerous African countries vying to continue this trend by formulating strategic trade agreements and relationships with Chinese corporations and public sector players. China realized the potential that positive relationships with the African continent held, and launched the Forum on China-africa Cooperation at the turn of the century. China has hosted bilateral events such as the Chinaafrica Economic and Trade Expo, providing a platform for African companies to showcase their products to Chinese consumers, as well as providing African companies easier access to the annually held China International Import Expo.
This means that an enabling environment exists for continued growth in bilateral trade. In order for Africa to benefit from this, prudent strategizing around China-specific route-to-market is necessary. Companies would need to give substantial attention to how they aim to enter the market, and follow best practices as exemplified by those who have already succeeded. China, whilst being an attractive market to enter, offers complexities as well, including vastly differing and rapidly changing consumer profiles, logistical challenges given the size of the country, the extensive scale of the market, rapidly shifting retail patterns as e-commerce becomes the norm and cultural differences. Understanding how to design product offerings that appeal to Chinese consumers, the competitiveness of Chinese manufacturers and the regulations involved with entering the market may be complicated, but rewarding when executed well. Despite being beset with the novel coronavirus in the first quarter of 2020, China will continue to be one of the largest global consumer markets. African exporters across the continent must position themselves to expand beyond just their domestic markets. A successful market expansion plan which includes China, if effectively implemented, will yield greater results for Africa’s young but fast-developing economy.
China has been fighting taxing battle against the spread of the novel coronavirus that has affected thousands of outbound and inbound flights to the country. The outbreak of the epidemic has led to precautionary measures. Naturally, limited travel, the delayed re-opening of many factories, and sharp reductions in consumer spending due to self-isolation, among others, have had a distortionary effect on economic vitality, felt in China and around the world. Global markets continue to watch steps taken by the Chinese Government to counteract the economic impact.
Key Economic Indicators
The consumer price index rose by 5.4 percent year on year in January. Food prices grew 20.6 percent year on year, contributing to January’s higher inflation compared to the December figure of 4.5 percent. Pork prices surged 116 percent year on year, as the reduced stock of pork due to African swine fever continued to affect China. The producer price index saw its first increase since May 2019, this was only a 0.1 percent increase year on year, up from the 0.5 percent decrease in last December.
PMI at Unchanged Level in January
China’s January purchasing manager’s index (PMI) came in at 50.0, 0.2 points lower than December’s reading. While the survey results for January’s PMI came in before the major outbreak of the novel coronavirus, concerns that a major plunge would occur in February on the back of an extended Chinese New Year holiday break were inevitable. The results will give great insight into the impact the virus will have on the Chinese economy and how quickly it will be able to recover. While services are expected to be affected more than manufacturing, a decrease across the board may occur.
Mining Indaba in Cape Town
South Africa hosted Investing in Africa Mining Indaba at the beginning of February. The event has fallen during Chinese Lunar New Year for several years, Indaba is the Xhosa and Zulu word for discussion or conference. The event is held annually to promote African mining interests to the global market. CA
The number of mobile apps shrank in China last year while those for music and video reported robust downloads.
About 3.67 million mobile apps were available by the end of December 2019, down by 18.8 percent from a year earlier, data from the Ministry of Industry and Information Technology (MIIT) showed. Mobile games continued to lead in number, accounting for about one quarter of the total, followed by daily tools, e-commerce and life services apps.
Music and video apps reported the most downloads, followed by social networking and communication tools, according to the MIIT.
Despite the shrinking mobile apps, China remained the world’s largest market for mobile apps user spending, according to global app market data provider App Annie.
Blockchain-based Donation Tracking Platform
A platform backed by blockchain technology to track donations has been launched by Chinese enterprises on February 10.
Initiated by China Xiong’an Group and hi-tech company Hyperchain, the platform does everything to push for philanthropic contribution, from seeking and matching charitable giveaways to tracking and delivering donations.
It adopts a multi-dimensional system of information transparency, making public logistics orders, live shots of the donations and other details. The Hangzhou Internet Notary Office provides corresponding notary services for the platform to prevent fraudulent donations and other dishonest acts.
“Once information concerning a certain donation is published, it can’t be changed or deleted, which greatly increases the cost of counterfeiting,” said Xie Yijun, Technical Director of the platform.
Small Firms to Enjoy Bond Issuance
China’s top economic planner has unveiled policies to keep enough liquidity for small and micro firms via bond issuance to tide over the epidemic.
Capital raised via corporate bonds is allowed to pay back or swap project loans used for the prevention and control of the novel coronavirus outbreak, said a guideline by the National Development and Reform Commission.
Small and micro firms with good credit records are encouraged to raise funds via a special bond program featuring an issuer union of several firms, an innovative financing product designed to expand market access and cut borrowing costs.
Firms are taking a heavy blow from the epidemic, but with good asset quality, they can use the freshly raised capital to repay the deposits and interest of maturing bonds.
Services Trade Deficit
China registered a substantial drop in service trade deficit last year with new progress made in structural reform and high-quality trade development, the Ministry of Commerce (MOC) said on February 10.
Service trade totaled $776 billion, with exports up by 8.9 percent year on year to $281 billion and imports down 0.4 percent to come in at around $495 billion, MOC spokesman Gao Feng said. The deficit of service trade stood at $214.3 billion in 2019, $25.2 billion less than that of 2018. The spokesperson attributed this to a robust domestic services sector and favorable policies to support innovative service trade growth.
Gao also highlighted the continued rapid expansion in China’s trade of knowledge-intensive services, which increased by 10.8 percent year on year to over $267.2 trillion.
Exports of knowledge-intensive services grew by 13.4 percent to $141.7 billion, while imports grew by 8 percent to $126.6 billion.
Lower Costs for SMES
Chinese e-commerce giant Alibaba and fintech firm Ant Financial announced 20 measures to mitigate the impact of the novel coronavirus outbreak on small and medium-sized enterprises (SMES) by lowering their costs on February 10.
Alibaba will waive service charges for all merchants on the company’s Tmall shopping platform in the first half of the year, said the company.
Cainiao Network Technology, Alibaba’s logistics arm, decided to exempt two months’ storage charges for warehousing merchants who join the platform prior to March 31.
To ease the financing pressure of SMES, Mybank, an online bank affiliated to Ant Financial, offered loans worth $1.43 billion to merchants registered in virus-hit central China’s Hubei Province. CA