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Five reasons why you need to be trading with China now
With a deadly virus roaming the globe and everyone stuck at home, you’d be forgiven for putting new business plans on hold while you stock-take, consolidate or just worry. Successful companies, however, are being as innovative as ever, not just in terms of the day-to-day (video-conferencing, accessing government funds etc) but also in their strategizing. This sometimes means looking at new markets.
China is the first major nation to have come through the virus and the Chinese are mostly back at work. The UK and its close neighbours are at least 50% down, so trade among them is badly hit. No matter what your political views are, you owe it to yourself to find out ways of engaging with the largest active economy in the world. Here are five reasons why:
1. There is still a significant product differential.
Whatever you sell, the chances that there is a competing product decrease the further you get from the UK’s sphere of influence. Just as there are many Chinese products and services that are not yet widely available in the UK, there are also many British products that do not have a close equivalent in China. Obviously if you make sensitive equipment that could be used to harm the UK’s interests, you shouldn’t be selling it to a Chinese company. But subject to this, we need to be engaging with Chinese commerce, now more than ever.
2. Trading with China is not as hard as you think.
You could be forgiven for thinking that China is simply too difficult or risky to deal with. There are countless anecdotes of people suffering stolen intellectual property or breached contracts with no possibility of enforcing. These are often (but not always) takes told by people who were badly advised. There is no substitute for hard work and preparation. The more you do, the less your risk. Simply meeting Chinese businesspeople in a social situation is no substitute for solid knowledge, due diligence and expert advice.
3. Size of market
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China is the largest country in the world by population and also has the largest middle-class market. Unlike the China of ten years ago, it is no longer just a few coastal cities that want high-end products. An enormous part of the country is as rich as the UK, and a few pockets are richer. The country is so vast it is easier to think of it province by province: for example, the economy of Hubei province is equivalent in size to that of the entire nation of Pakistan; that of Fujian province is equivalent to Malaysia; Beijing to South Africa; Shanghai to Argentina, Guangdong to France, and so on.
4. Affinity with the UK
Most Chinese currently think well of the UK. Whereas there is a love-hate relationship with America, the UK is seen as less antagonistic, and is respected for many aspects of its culture, including education, healthcare and cultural products such as sport and media. Advanced technology and food tech are also highly prized. The British have a reputation for being trustworthy and transparent, if perhaps a little ponderous. Brexit has made many Chinese think that they are now on a level
playing field with EU countries rather than at a disadvantage, so now is a good time to take advantage of the generally positive view China has of us.
5. China is at work
As mentioned before, the most obvious reason to be trading with China is that you can. While much of the world is in lockdown, China is not, and is riding a wave of national confidence because of what they see as their successful handling of the coronavirus. Consumers are out in shops again and hungry for products; factories are operating again and looking for buyers (and suppliers). Perhaps as importantly, Chinese investors are out on the warpath, looking for assets overseas.
The opportunities are of course offset by many perceived challenges. Corruption, lack of rule of law, monopolistic behaviour, IP theft, language barriers – all these are cited as reasons not to do business with Chinese companies. An American broker once told me “You can’t trust the Chinese in business.” I replied: “You mean you can’t trust all Chinese. Of course not. You can’t trust all Americans, either.” It turned out her contacts had been cheated by a company that happened to be Chinese-based, but the contacts had not done due diligence on their counterparty, they had not ensured their dispute resolution clause was enforceable, they did not even have a contract in languages that both sides understood. You wouldn’t behave like that with a company in your own country, so why do that with a Chinese company?
Faced with the challenges of a difficult language and faraway business culture of which they have no first-hand knowledge, many British or American businessman either shy away, or worse, rush in, placing too much credence in a deal-maker who tells them that doing business in China is all about relationships and that legal work is unnecessary. China is full of talented, principled businesspeople, many of whom are eager to work with British business, and you shouldn’t give up on the whole opportunity just because previous mistakes have been made. With a little extra effort, you can expect greater rewards.
I hope more UK businesses make the effort to engage with the Chinese market. Perhaps that could be part of the effort to win back our economy during these difficult times.
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