SA’S exporters should stake their claim in China

NEWS and headlines over recent weeks have starkly reflected the changing fortunes, or misfortunes, of China’s economy. It is clear that economic growth has already slowed drastically — probably to below 7.5% in the third quarter — and no significant rebound is expected over the next one or two quarters. Purchasing managers index data just released for last month again showed the weakness of the manufacturing sector and most indicators are pointing south. In the absence of substantive stimulus by Beijing observers have been reducing this year’s gross domestic product growth forecasts and views on next year are beginning to turn equally soft.

This new world view, of a dramatically moderating Chinese economy, is in outlooks for much of Asia and elsewhere. The once-reliable beacon of light in the global economy has now dimmed. But as serious as the implications of a China slowdown are, it is also true that China will endure as a key driving force for many countries and industries over the long term. China may be slowing, but its $8-trillion economy is still expanding briskly.

More importantly, with all the negative coverage, it is easy to overlook both the big opportunities and new areas emerging as China transforms itself to a “next generation” economy. Over the past month alone, we have worked with international players from various industries — including high-end industrial manufacturers, IT service companies, specialised industry consultants and wine merchants — who are queuing to do business in China. For these organisations, the slowdown does not negate the overall opportunity.

So, while some are defensively bracing for tougher global trading conditions, others are seeing this as the moment to establish and consolidate their China positions. They are gathering intelligence, developing sales channels, identifying customers and engaging with stakeholders on the ground in China. They view China as a large part of their future.

If I needed any reminder of the pull of the China market, a new book by former colleagues at the Boston Consulting Group, called The $10 Trillion Prize, demonstrates the overall opportunities brilliantly. It has captivated the newly affluent in China and India.

Sure, the economic slowdown will be felt, but the future scale of China’s (and India’s) consumer and industrial market segments offers fantastic opportunities. Setting up shop in China does not mean spending heavily on retail and distribution capacity either. Many international firms target Chinese customers directly or they piggyback with carefully selected channel partners and local distributors.

Last year, China’s imports amounted to $1.7-trillion, trailing only the US. This year, despite the slowdown, China’s imports will hit $1.8-trillion and about $2-trillion next year.

Indeed, changing patterns of growth and development in industrial and consumer markets mean that there is a growing opportunity across a wide range of industries and products. China is certainly not just a market for resources and raw materials. It imports products and services of all classes and the Chinese are becoming significant consumers of just about anything: wine, diary products, coffee, precision engineered goods, industrial fasteners, furnace technologies, safety practices, logistics, and so on. The list goes on.

But many international export managers still argue that it is impossible to break into the China market. Language and culture challenges and some tariff and nontariff barriers do exist. The key is that these challenges are being overcome by dynamic companies on a daily basis, as share in the bonanza. It is certainly not easy, but it is possible. What is clear is that managers that are more proactive are succeeding in China and there is evidence from Australian, New Zealand, small European economies’ and South American companies that it is possible to grow exports fast.

South African firms must focus more actively on this opportunity. But this implies that companies’ leadership must be strategic and see the potential, and support the initial market development initiatives that are required to gain traction. Information, time, managerial and financial resources must be made available in order to succeed. But the prize is real and other countries are cashing in.

As China slows down, do not misinterpret what it means. China is still a colossal opportunity and South African exporters must stake their claim.

Other players are aggressively targeting China — with success. SA has a large set of products and services to take to the world’s second largest importer — but the right attitude and approach is needed.

Kobus van der Wath is Group MD of The Beijing Axis. He can be reached at kobus@thebeijingaxis.com