Opportunities in China

During the last three years, I have pointed out in this blog and elsewhere that Cardiff was the only major city in the UK without a branch of the China British Business Council (CBBC) and that, as nation, this was placing us at a disadvantage in trading with one of the world’s fastest growing economies.

On Wednesday evening, this issue was finally addressed when the CBBC opened a branch in Cardiff at the start of the Chinese year of the Ox.

It was an excellent reception, although it was disappointing that more businesses did not turn up given the potential importance of China to the UK economy. Indeed, the Prime Minister himself predicted that British exports to China could double to £10bn over the next 18 months.

But what of China and its future economic prospects, and has the recession changed the way that this massive economy will manage its relationship with the rest of the World?

No one can deny the size of the Chinese economy and the way it has expanded over the last few years. China surpassed Germany in 2008 to become the world’s third largest economy, and while industrial growth in China has slowed it is still estimated to reach 8% next year at a time when all Western countries are in recession.

Yet critics are pessimistic regarding its continued success, with some suggesting that, in the short term, there may be significant problems.

There are signs that, with the world recession, the demand for exports have slowed down dramatically, with a fall of 13% in the last quarter of 2007 and a further decline of 6% predicted for 2009. As exports accounts for 40% of China’s GDP, there are worries that the main driver of exporting – foreign direct investment – is also drying up, reducing by over 16% since 2007.

Recent statistics show that as many as 26 million migrant workers – or nine times the population of Wales – are now unemployed as China’s export industry feels the effect of the global recession.

Despite this, China seems to be in a better position to weather the economic storm of the next 12 months.

While many Western countries are entering recession with weak financial institutions, high consumer debt and public sector deficits at an all time high, China has a government budget which is in surplus, a high savings rate among its population and domestic banks with plenty of capital. It has also recently committed £400bn to stimulate its economy.

So what opportunities exist for Welsh firms wishing to do business in China?

According to some experts, the combination of mind-boggling demographics and a continuing economic momentum offers major prospects for those willing to take the chance to trade.

China’s urban population will total nearly a billion by 2025, increasing by 325m. This will result in 15 cities with a population of more than 25m and 219 cities with more than one million people within their boundaries.

Within these cities, 50,000 new skyscrapers will be built, equivalent to 10 New York cities. There will also be 170 mass transit systems developed during the next fifteen years along with 40bn square metres of additional floor space.

China is also embracing new technologies and already there are 300 million internet users surfing for an average of 19 hours per week, particularly in online gaming.

There are also more than six million university graduates joining the workforce every year, improving the quality of the businesses across the country.

Such statistics may be astonishing for those living in a small nation such as Wales, but they are a timely reminder of the scale of business opportunities that could become available for those wishing to partner with China.

As the Chinese philosopher Sun Tzu said, opportunities will multiply as they are seized. With the opening of the CBBC offices in Cardiff, I can only hope that stronger commercial relationships will be formed between our two dragon economies with the support of this office, and that many more Welsh firms will sign up to the trade missions to Hong Kong and China later this year to take full advantage of the opportunities presented by one of the world’s fastest growing economies.