Tuesday, July 27, 2010

China Continues to Lead the West out of Recession

Upon recently completing a month long project in China and Vietnam, I noticed the burgeoning China economy continues to roll on. The IMF recently upgraded China’s annual growth rate to 10.5%, and with US$2.5T (yes, that’s Trillion) in foreign reserves and the world’s 2nd largest economy at a US$4.9T GDP, there is a lot more to the China economy that can be leveraged by Western businesses as demonstrated by the following.

1) Shanghai China is currently hosting the 2010 World Expo. This event reveals the character of this market. Starting in May and concluding in October, the World Expo is expected to attract nearly 70 million people, with a daily average attendance of 344,000. They recently set a record of 553,500 people on June 26. With well over 90% of attendees being mainland Chinese, and pavilion line wait times generally 2 to 4 hours, at 160RMB (US$23.50) for a standard day ticket and 90RMB (US$13.25) for a standard evening ticket, this demonstrates the buying power of this market. Most mainland Chinese see this event as the premier opportunity to see a large window into the world, while most countries use this opportunity to advertize tourism and business opportunities to the Chinese market.

2) Infrastructure development has continued at a breakneck speed. While living in Shanghai in 2004-05, there were four subway lines running through the center of the city. Today there are more than 13 lines running around the entire city that carries nearly 5 million people per day. The continuing Foreign Direct Investment that pours into this country ($90B in 2009) is also contributing to China’s prosperity.

3) Recent strikes among several multinationals that include Honda, Toyota, Foxconn, and others have driven wages up an average of 20-30% and, ironically, are endorsed by the Communist Party. These rising salaries are increasing disposable incomes in top tier cities, which contribute to the great opportunities to sell highly desired Western products.

These are only a few of the many factors that signal a great opportunity to sell your products into the China market. By selecting the right strategy to find, target, and sell your product in this market, your company can share in the prosperity of this emerging behemoth. Don't miss this great opportunity to grow your business. Will your products sell in China?

Let us know…

Rodney Hiel is Managing Director of Asia Business Consulting. Minnesota based Asia Business Consulting strategically researches, develops, and tactically executes a proven process to create cost effective strategies for market entry in today’s Southeast Asia and China. Visit http://www.asiabusinessconsult.com/ for additional information.
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Jean Fasching, VP CMI Research said...

There's been a lot of buzz lately about China leading the world out of the recession and its impending Economic Dominance. With your observations - I can see why. See Aspen Speaker http://www.aspendailynews.com/section/home/141349 USA’s businesses can find opportunities as China’s populations forms a bigger middle class - but we'll need to build our manufacturing (that we've lost as we've increased productivity). What's your perspective - Will China's growth and Economic Dominance be a stabilizing force for the US economy or a destabilizing force – in, let's say, the next 5-7 years?

Rodney Hiel said...

Hi Jean,

Thanks for the comments and great question. There are a multitude of factors to numerous to mention that play into the outcome of this question. And in "the perfect storm", any combination of these could either stabilize/destabilize the US economy.

But in short for today, China relies heavily on our ~$14+ Trillion economy to help them grow their ~$2.5T in Foreign Reserves and fund the high growth rate of their ~$5T economy (now 2nd largest in the world recently passing Japan). With this backdrop, generally speaking China's growth (in addition to India and other BRIC countries)will probably be a stabilizing force over the next 5-7 years.

I say probably only if US companies use an effective development strategy that can leverage these global market conditions to effectively source, manufacture, and/or sell products in these markets. Yes, there may be some growth in specialized manufacturing jobs in the US to support this, but this will also drive growth in international marketing/sales positions as well.

You are correct, the Aspen Ideas Festival provides some great perspectives and they make some valid points. It is a great forum to lead our national debate on these issues.

Thanks for your comments.

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