OPEN FOR BUSI­NESS

Land­mark Shang­hai im­port expo shows how China wants to buy what the world has to of­fer

China Daily European Weekly - - Front Page - By AN­DREW MOODY an­drew­moody@chi­nadaily.com.cn

Some 300,000 vis­i­tors are ex­pected in Shang­hai for the in­au­gu­ral China In­ter­na­tional Im­port Expo, one of the ma­jor flag­ship events to be held in China this year.

More than 2,800 com­pa­nies from 130 coun­tries, in­clud­ing 200 com­pa­nies on the For­tune Global 500 list, will par­tic­i­pate in the six­day event, which begins on Nov 5.

The expo, which will be held an­nu­ally, is set to demon­strate clearly to an in­ter­na­tional au­di­ence that China’s econ­omy is no longer just the man­u­fac­tur­ing pow­er­house of re­cent years, but one driven by con­sumers who want to buy what the world has to of­fer.

Against a back­ground of in­creas­ing in­ter­na­tional trade ten­sions, the expo is also in­tended to demon­strate that China is open for busi­ness as the coun­try marks the 40th an­niver­sary of re­form and open­ing-up.

Sherri He, a part­ner at man­age­ment con­sult­ing firm A.T. Kear­ney’s Shang­hai of­fice, says it is prob­a­bly the big­gest im­port-re­lated event of all time.

She says it is on a much big­ger scale than the Can­ton Fair, the bian­nual event that has been held in Guangzhou, Guang­dong prov­ince, since 1957.

“That would be a com­par­i­son point, but that is for both im­ports and ex­ports. This is prob­a­bly the first-ever global im­port event,” she says.

The ex­hibitors will in­clude a wide range of com­pa­nies, from those demon­strat­ing their ex­per­tise in high-end tech­nolo­gies such as in­dus­trial ro­bots, ma­chine tools, ar­ti­fi­cial in­tel­li­gence and ad­vanced health­care, to those sell­ing food items and lux­ury con­sumer goods.

For some, the main goal will be to get up close to the Chi­nese mid­dle class con­sumer, whose grow­ing num­bers are set to be one of the global eco­nomic mega­trends of the coming decades. Ac­cord­ing to McKin­sey & Co, China’s mid­dle class could in­crease to 630 mil­lion by 2022, al­most dou­ble the cur­rent US pop­u­la­tion of 327 mil­lion.

One high-pro­file ex­hibitor will be Ger­man car­maker BMW. It re­con­firmed its com­mit­ment to the Chi­nese mar­ket by an­nounc­ing in Oc­to­ber that it would pay 3.6 bil­lion eu­ros ($4.1 bil­lion; £3.2 bil­lion) to take ma­jor­ity con­trol of its joint ven­ture with Bril­liance China Au­to­mo­tive Hold­ings. The com­pany was tak­ing ad­van­tage of new rules, an­nounced by Pres­i­dent Xi Jin­ping at the Boao Fo­rum in Hainan prov­ince in April, to open up China’s au­to­mo­tive sec­tor to for­eign play­ers.

Jochen Goller, pres­i­dent and CEO of BMW Group Re­gion China, says one of the pur­poses of the expo is to high­light the “up­grad­ing needs” of the Chi­nese con­sumer, which he hopes his com­pany will meet with its lead­ing po­si­tion in au­ton­o­mous driv­ing and elec­tric cars.

“(This) greatly res­onates with the core pur­pose of CIIE. We be­lieve the expo is a plat­form to demon­strate our long-term com­mit­ment as well as our con­fi­dence to grow with China.”

How­ever, those ex­hibit­ing at the expo will find that the Chi­nese con­sumer mar­ket, al­though po­ten­tially lu­cra­tive, is not easy to crack.

Alina Ma, as­so­ciate re­search di­rec­tor in Shang­hai for Min­tel, a mar­ket re­search com­pany, says that sim­ply be­ing for­eign is no longer such an al­lure to the Chi­nese con­sumer.

“This may have been the case 10 years ago, but no longer. Chi­nese con­sumers have now trav­eled abroad and have a lot of ex­pe­ri­ence. They are par­tic­u­larly savvy when it comes to buy­ing on­line,” she says.

“They like to com­pare and con­trast prod­uct fea­tures, and they of­ten find that Chi­nese prod­ucts of­fer what they need and are value for money.”

Ma says an in­creas­ing trend is for Chi­nese con­sumers to de­sire prod­ucts that have a Chi­nese her­itage or value.

“This ap­plies to younger con­sumers as much as older ones and poses an­other chal­lenge for for­eign com­pa­nies.”

Mats Har­born, pres­i­dent of the EU Cham­ber of Com­merce in China, whose Shang­hai chap­ter was to re­lease its own po­si­tion pa­per on the expo on Nov 2, says 60 per­cent of its mem­bers thought Chi­nese prod­ucts were now as in­no­va­tive as their own prod­ucts, or more so.

“It is a sig­nal I want com­pa­nies to send back to their head­quar­ters. They need to wake up and put their re­sources in China,” he says.

China’s im­ports are an im­por­tant driver of the global econ­omy, with the world’s se­cond-largest econ­omy also be­ing the se­cond-largest im­porter of goods for nine con­sec­u­tive years, mak­ing up 10.2 per­cent of global im­ports in 2017, ac­cord­ing to Chi­nese gov­ern­ment data.

China’s im­ports of goods rose to $1.74 tril­lion in 2017, up by 16 per­cent year-on-year, whereas its ex­ports rose by only 11.4 per­cent to $2.216 tril­lion.

Louis Kuijs, head of Asia eco­nomics for con­sul­tancy Ox­ford Eco­nomics, says the re­bal­anc­ing to­ward con­sump­tion and away from ex­ports is one of the most im­por­tant global eco­nomic trends.

“Do­mes­tic de­mand in China con­tin­ues to grow faster than the rest of the world, which means im­ports are go­ing to be in­creas­ingly pulled in by China,” he says.

Kuijs says that de­spite the rhetoric coming from the ad­min­is­tra­tion of US Pres­i­dent Don­ald Trump about China’s trade sur­plus with the United States, its sur­plus with the rest of the world is ac­tu­ally dis­ap­pear­ing.

He is fore­cast­ing that the cur­rent ac­count sur­plus of 1.3 per­cent of GDP last year will fall to just 0.1 per­cent this year and may soon be­come a deficit.

“If it hap­pens, it will be a mile­stone and a lot will be writ­ten about it. China has a deficit with economies and coun­tries like Malaysia, which are part of China’s Asian sup­ply chain in­volv­ing the im­port of large vol­umes of com­po­nents. It also im­ports raw ma­te­ri­als from coun­tries like Aus­tralia. In­creas­ing im­ports will mean that its cur­rent over­all sur­plus will dis­ap­pear.”

The expo is tak­ing place as China marks the 40th an­niver­sary of re­form and open­ing-up.

Leon Wang, ex­ec­u­tive vice-pres­i­dent for in­ter­na­tional and China pres­i­dent at As­traZeneca, the UK-based phar­ma­ceu­ti­cals multi­na­tional, which will be an ex­hibitor, says the an­niver­sary gives the expo added sig­nif­i­cance.

“At a time when China is cel­e­brat­ing its 40th an­niver­sary of re­form and open­ing-up, it is of greater sig­nif­i­cance for the coun­try to host this in­ter­na­tional event in Shang­hai. It shows not only the rise of China un­der this pol­icy, but also presents a na­tional im­age that it is open, in­clu­sive and re­cip­ro­cal.”

China is the com­pany’s big­gest mar­ket af­ter the US, and Wang says ris­ing in­comes are lead­ing the coun­try’s mid­dle class, in par­tic­u­lar, to de­mand bet­ter health­care.

“With higher eco­nomic growth and per­sonal in­comes, peo­ple are de­mand­ing more and bet­ter health­care. The needs of pre­cise, per­son­al­ized and smart treat­ment with af­ford­able and ac­ces­si­ble health­care ser­vices are in­creas­ing,” he says.

“We have delved deep into the Chi­nese mar­ket and are in­creas­ing in­vest­ment. (We are) fo­cus­ing on ther­apy ar­eas where Chi­nese pa­tients have the most ur­gent de­mand,” he says.

The expo is also likely to demon­strate how im­ports are im­por­tant in driv­ing China’s own in­dus­trial mod­ern­iza­tion. China wants to make ad­vances, in par­tic­u­lar, in ad­vanced man­u­fac­tur­ing, ro­bot­ics and ar­ti­fi­cial in­tel­li­gence.

Denis De­poux, CEO of Greater China for man­age­ment con­sul­tants Roland Berger, says ad­vances in tech­nol­ogy gen­er­ally re­quire a col­lab­o­ra­tive ef­fort.

“Im­ports make sense from a mul­ti­ple stand­point, but one of the most un­der­ly­ing is their role in the mod­ern­iza­tion of the Chi­nese in­dus­trial foot­print in terms of tech­nol­ogy trans­fers and in other re­spects.”

De­poux, who is also deputy head of Asia for the con­sul­tancy, says China needs im­ports to fill gaps in its own tech­nol­ogy deficits, de­spite its am­bi­tious over­all plans.

“You can de­cide overnight that you want to be a pro­ducer of air­craft en­gines or gas tur­bines, but from that mo­ment to ac­tu­ally achiev­ing it could have a lead time of 20 to 30 years. In the mean­time, China, like many other na­tions, will keep im­port­ing these high-end prod­ucts.”

Mary Ma, sec­re­tary-gen­eral in Shang­hai for the Cen­ter for China and Glob­al­iza­tion, an in­de­pen­dent think tank, be­lieves the expo is wor-

thy of be­ing com­pared to London’s 19th­cen­tury Great Ex­hi­bi­tion and is a ma­jor op­por­tu­nity for im­porters to show­case their prod­ucts.

“Many have said it pro­vides a 6-plus365 op­por­tu­nity — you ex­hibit at the show for six days and then you can sell on­line for 365 days. This is par­tic­u­larly the case with Nov 11 (Sin­gles Day, when on­line goods are heav­ily dis­counted) coming up,” she says.

Ma, who re­turned to China last year af­ter work­ing in Chicago on ex­port pro­mo­tion to China for the In­ter­na­tional Trade Cen­ter of Illi­nois, says the pur­chas­ing power of younger peo­ple in China is some­thing of a phe­nom­e­non.

“The one thing I no­ticed when I came back was the num­bers of 20- to 30-yearolds in the shop­ping malls of Shang­hai and Bei­jing. This is a huge mar­ket, and I am not sure if the for­eign brands do the best to reach it, par­tic­u­larly on­line.”

Joseph Healy, CEO of Judo Cap­i­tal, a spe­cial­ist lender based in Mel­bourne, Aus­tralia and au­thor of Chi­nese Firms

Go­ing Global: Can They Suc­ceed?, says the chang­ing na­ture of China’s im­ports is be­gin­ning to have an ef­fect on tra­di­tional re­source ex­porters like Aus­tralia.

“It used to be just an ex­porter of raw ma­te­ri­als, but that is shift­ing. China’s grow­ing mid­dle class is a won­der­ful op­por­tu­nity for Aus­tralia and New Zealand’s dairy prod­ucts, wines and other prod­ucts,” he says.

“On a po­lit­i­cal level, how­ever, Aus­tralia has been pa­thetic in terms of en­gag­ing with this op­por­tu­nity and has come across at times as quite dis­re­spect­ful.”

De­poux at Roland Berger be­lieves the expo will be a ma­jor op­por­tu­nity for coun­tries along the routes of the China-pro­posed Belt and Road Ini­tia­tive that have not ex­ported to China be­fore.

“I am think­ing, in par­tic­u­lar, of Cen­tral Asia and agri­cul­tural ex­ports, but this might also be an op­por­tu­nity for some African and South Amer­i­can coun­tries to try and es­tab­lish a mar­ket po­si­tion in China,” he says.

He adds, how­ever, that while it is a mar­ket of huge po­ten­tial, it also has its own unique chal­lenges.

“It is a very com­plex, frag­mented and very fast-mov­ing mar­ket. It of­ten changes so fast that by the time you are think­ing about mov­ing in, it has changed again.”

Against a back­ground of es­ca­lat­ing trade ten­sions, many of those tak­ing part hope the expo will demon­strate the im­por­tance of open trade.

Wang at As­traZeneca is con­fi­dent the expo will send an im­por­tant sig­nal.

“We greatly ad­mire the fore­sight of the Chi­nese lead­er­ship in unit­ing the world ever more closely by host­ing such an in­ter­na­tional event. China is an im­por­tant en­gine for global eco­nomic growth and pros­per­ity, and I am pleased the Chi­nese gov­ern­ment sup­ports glob­al­iza­tion and free trade,” he says.

Wang Huiyao, pres­i­dent and founder of the Cen­ter for China and Glob­al­iza­tion, agrees that the expo is a ma­jor op­por­tu­nity for com­pa­nies around the world.

“China wants to buy more. It doesn’t want a trade sur­plus,” he says. “This event is very sig­nif­i­cant and rep­re­sents a ma­jor shop­ping op­por­tu­nity.”

“We be­lieve the expo is a plat­form to demon­strate our longterm com­mit­ment as well as our con­fi­dence to grow with China.” JOCHEN GOLLER pres­i­dent and CEO of BMW Group Re­gion China

LI MIN / CHINA DAILY

ZHOU DONGCHAO / FOR CHINA DAILY

Signs pro­mote the up­com­ing China In­ter­na­tional Im­port Expo in Pudong New Area, Shang­hai, on Oct 11.

WANG JING / CHINA DAILY

Mats Har­born, pres­i­dent of the EU Cham­ber of Com­merce in China

Mary Ma, sec­re­tary-gen­eral in Shang­hai for the Cen­ter for China and Glob­al­iza­tion

Sherri He, part­ner at man­age­ment con­sult­ing firm A.T. Kear­ney’s Shang­hai of­fice

Jochen Goller, pres­i­dent and CEO of BMW Group Re­gion China

WANG CHUN / FOR CHINA DAILY

Con­tain­ers are loaded onto a ship at Lianyun­gang Port in Jiangsu prov­ince.

WANG JING / CHINA DAILY

Joseph Healy, CEO of Judo Cap­i­tal, a spe­cial­ist lender based in Mel­bourne, Aus­tralia

Leon Wang, ex­ec­u­tive vice-pres­i­dent for in­ter­na­tional and China pres­i­dent at As­traZeneca

Louis Kuijs, head of Asia eco­nomics for con­sul­tancy Ox­ford Eco­nomics

Denis De­poux, CEO of Greater China for man­age­ment con­sul­tants Roland Berger

Alina Ma, as­so­ciate re­search di­rec­tor in Shang­hai for Min­tel

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