China market holds untold opportunities for SA Inc
THESE past few weeks have been busy for SA Inc in China. The Department of Trade and Industry (DTI) and China’s Ministry of Commerce sponsored two South African expos in Shanghai (September 10-11 ) and Beijing (September 12-13), with the support of the South African embassy in China, as well as China’s embassy in SA.
Furthermore, Trade and Industry Minister Rob Davies led a delegation of more than 60 companies to the 17th annual China International Fair for Investment and Trade (CIFIT) in Xiamen from September 8-11. Most of the feedback my colleagues and I received from representatives of South African companies who attended these various events is that although they have heard of China’s size and growth stories, they still cannot quite believe how big China actually is and what opportunities it presents. Even those who visit annually are surprised by the mushrooming of tier three and four cities and the developments within larger cities.
I thought it prudent to relay this message to South African executives and policy makers: to remind them of the sheer size and number of opportunities South African companies can tap in China. China’s gross domestic product (GDP) stood at about $8.2-trillion last year, contributing to about 11% of the world’s GDP. It is almost equal to the combined GDPs of France, the UK and Germany, and more than four times larger than that of Africa.
When taking into account its current real growth rate of 7.5%, China will nominally add close to $820bn to its economy this year alone, that is equivalent to adding SA’s economy more than twice over.
All this growth plays a part in expanding China’s middle class and their subsequent demand for imported products from around the world. These impressive figures might lead one to ask who is taking the largest slice of China’s metaphorical cake?
Last year, China’s imports equalled $1.8trillion, according to China Customs. Three out of China’s largest five import sources totalling $479bn last year were, unsurprisingly, from Asian manufacturing powerhouses Japan (first), South Korea (second) and Taiwan (fourth). The remaining two spots were taken by the US and Germany, with imports worth $133bn and $92bn, respectively.
Resource-rich Australia (sixth) is not far behind with $85bn in exports to the world’s second-largest economy.
China Customs calculates SA as its 10th largest import source. Further, after having seen a 21.6% increase in first-half imports this year compared with the same period last year, it is relatively safe to say that China’s “slowdown” has not affected its appetite for South African goods.
Despite a poor global economy, the value of exports from SA to China, which it calculates as its largest export destination, continued to grow while SA’s next three largest export destinations (US, Japan and Germany) have all seen a marked decrease in demand since 2011. That number is unsurprising given SA’s vast resources — minerals and metals account for a large portion of exports to China.
But the key take-away is that SA’s impressive export growth to the former Middle Kingdom, as well as annual trade fairs and expos held in China, is rapidly increasing its visibility to Chinese businesses. This visibility needs to be leveraged to show that SA has a sophisticated manufacturing sector that produces at least some competitive value-added goods.
The DTI, in its efforts to balance trade with China away from resources, has identified strategic industries in SA that could appeal to Chinese businesses. These include agroprocessing, chemicals, plastics, automotive, capital equipment, steel and aluminium, as well as various services.
China will this year import more than $2trillion, and smart global companies are gearing up to be part of this opportunity.
Proactive management teams from across SA Inc must now join this drive.
Indeed, despite SA’s challenges, businesses in these industries have unique value-added products and services to offer the Chinese. There is little doubt that there are many hurdles to overcome. These include finding a stream of clients, tapping the most suitable channels to market, dealing in a different language and with different regional cultures and regulations.
The list goes on. But a research-based strategy and a systematic approach will yield results. Support through a wide variety of options such as SA’s embassy and consulates, professional service providers, the “SA Inc network” in China as well as other networks should be actively leveraged for success. After all, there is a $2-trillion prize.