Market crucial for American firms

Experts point to continuing opportunities in China for global businesses while also noting rising competition

China’s market still provides great potential for foreign companies despite an economic slowdown, experts from the United States said, adding that US firms need to be in the market to learn how to compete at Chinese speed.

Though Western media may allude to a “crisis” or “collapse” of China’s economy, Andy Rothman, an investment strategist at asset manager Matthews Asia, said he does not see it that way.

“Things are not too bad,” he told a conference hosted by the Bay Area Council exploring opportunities in US-China economic relations.

Rothman, who specializes in China’s economy and US-China relations, said a comparison of the shape of the Chinese company today to the pre-pandemic level in 2019 reveals that the value added is 22 percent higher, consumption 23 percent higher, and retail sales 14 percent higher.

The property market — a key sector in the Chinese economy — reflects some regulatory problems and a lack of confidence rather than “an economic collapse”, he said.

A study of comparable data for existing home sales and new home sales in China’s 25 biggest cities shows that new home sales in the first three quarters of this year were up 14 percent compared with the same period in 2019.

“What this tells me is that there’s plenty of demand for housing. There are plenty of people who can afford to buy a house,” he said.

“There’s no question that the demand for housing is slowing down because it’s starting to become a mature industry. This is an industry which has been slowing down for a long time and will continue to contribute much to China’s economy. But that’s really different from arguing that it’s a crisis or collapsing.”

US companies that operate in China are also seeing continued opportunities in the country.

Sean Stein, chairman of the American Chamber of Commerce in Shanghai, said when he was in Washington, he was repeatedly asked why US companies need to be in China and why that is good.

“Because if our companies are not on the ground in China, they’re not seeing the incredible innovation that’s taking place. They don’t see what’s coming down the pipeline, and they also don’t have the opportunity to get tough and strong in one of the most competitive markets on the planet,” Stein told a webinar examining China’s economic growth.

Another point Stein said they raised to leaders in Washington is that there are not enough US companies in China or are active in China.

As a result, US companies and the niche they fill in the industrial ecosystem will be replaced by the Europeans, the Japanese, or increasingly likely by Chinese companies, thus undermining the competitiveness of US companies, he said.

Instead of “security risks” and “supply chain risks”, the chamber’s latest survey shows that most US companies said their No 1 risk over the next three to five years was domestic competition.

A majority of them said Chinese companies are better at adopting digital strategies and new technologies, and they are better at marketing and getting permits, Stein said.

As a result, more and more US companies are looking for strategic partners or joint venture partners in China, or trying to find ways to work closely with Chinese companies.

In some sectors, such as exports, US companies in China “are starting to pick back up and they’re starting to see some light at the end of the tunnel”, Stein said.

“In some other sectors, like services and investment, we’re also seeing a pickup on the Chinese side,” he said.

While it may be hard for China to get back to the years of 7-8 percent growth, even mild growth in an economy so large in scale means there will be plenty of opportunities for foreign companies in the right niche, Stein said.