Why should SMEs Focus in China Market?

Why should SMEs Focus in China Market?

Since China opened its economic door in Y1980 by the late Chinese leader Deng Xiaoping, no one would have expected then of the humongous stride in its achievement in just 30 years’ time. Just after China celebrates its first 30-years benchmark of new economic policy, we have seen a great leap in its world status ever since it was admitted into World Trade Organization in Y2001.

What is left behind for our wild guess is how much more China can achieve when it is stepping into the threshold of next 30-years from Y2010. As late Deng said, the first 3 decades were only meant to consolidate infrastructure and hardware foundation. The second phase of another 3 decades will be the genuine development of economic growth after the first stage was done properly.

Looking at the current global economy, China has fast risen to become the second largest economy in Y2010 bypassing Germany and Japan. As China has 23 provinces with many aggregate cities within them, it is tongue-wagging to read that less than 1/3 are classified as first-tier cities now but already submerged in the rapid inflation and fast-growing expansion. Indeed, it may take another 3 – 5 decades to fully develop only just ½ to 2/3 of the aggregate cities nationwide.

While U.S. is still reputed as the world’s largest economy but suffering in economic fatigue, China has been struggling with stoking growth that many Chinese mainlanders are finding hard to cope with quick rising prices. Besides being the country that holds the largest foreign currency reserves valued at USD2.6 trillion, below are many reasons why SMEs should streamline their attention to develop businesses in China:

1)      In Y2009, China sold 13.6 million vehicles as reported by Association of Automobile Manufacturers, passing the sales record of U.S. auto-sales for the first time that recorded at 10.4 million.

2)      On 13 August 2010, Agricultural Bank of China has the biggest initial public offering in the world’s record at USD22.1 billion.

3)      According to Internet Network Information Centre in China, there was an estimated 420 million online users in Y2010 that is already larger than the whole population of U.S. economy.

4)      China overtook Germany as the world’s 2^nd largest exporters in Y2009, chalking USD1.2 trillion worth of overseas shipment compared to USD1.1 trillion worth of exports in Germany.

5)      In Y2009, China became the largest energy consumer in the world with 2252 million metric tons of oil usage compared to 2170 million metric tons consumed by U.S. population in previous year.  Just as it was ranked as the world’s top energy user, china has also become the top carbon emission nation. According to Netherlands Environmental Assessment Agency, China emitted 14 percent more greenhouse gases in Y2007 than the U.S. industries.

6)      Today, China manufactures the largest production of solar cells in the world with more than 1/3 of total production comes from Mainland. Just as the green solar energy expands fast enough throughout the world as a low cost and highly effective energy source, the global demands rose 51 percent in Y2010 while 95 percent of solar panels made in China are sold overseas.

7)      The U.S. and the westerners are well-known to be good beer drinkers. This fact has no more been valid till Y2002 when the Chinese took over the beer mugs due to escalation of more rapid growth in economies. In Y2008, Kirin Institute conducted a global research and reported that China’s drinkers have literally drained away ¼ of the world’s beer into the stomach. Where else can it be?

8)      According to World’s Health Organization, China has always been the largest producer and consumer of tobacco. To many Chinese, smoking is more like a tradition of manhood that has been passed down since last century when great politicians appeared in media exposure with cigarette held in their hands. Till date, China is one of the few countries among the modernized nations that does not restrict smoking in public areas like restaurants, offices, air-conditioned environments. Being well-known for its superb low prices in tobacco production, China has 320 million smokers that equates to 1/3 of all smoking community on the planets!

9)      China is the world’s biggest rare earth producer, a mineral that is essential in making mobile equipment, batteries in hybrid cars, catalysts in cutting exhaust emission in automobiles and wind turbines. The biggest importers of rare earth are U.S. and Japan for high-industrialized usage. According to China’s Chamber of Commerce of Metals, Minerals & Chemicals Importer & Exporters, the mainland miners have been providing 95 percent of global shipment out of 17 rare earth metals. 

Sound fantastic? Perhaps, we will have more compiled data in this new decade that put many facts on China to be the truly world’s number 1 economy. As the world’s emerging markets are rising rapidly, basic resources like water, food supply, energies will become great necessities in addition to being scare on earth.

For SMEs, it is best to identify a new market for expansion with the most essential factor backed up by large consumer spending. In China, there are just too many business roles to be considered covering from the extensive internet community in addition to the population of 1.3 billion people walking on the streets everyday.

Businesses involving in energies and commodity –related fields are the utmost industries while consumer services are separate enlarging sectors that have been growing massively with rising retail spending in China. Realty and manufacturing industries are in current boom-time with more upside potentials when one can manage risk cautiously in the different tides of Chinese economy.

In our opinion, it is good to stay observant in China’s progress. Moving into the future, many more new-era technologies will be developed in this country to meet the increasing consumer demands as well as managing the shortages in resources output!

DAR Wong is the Principal Consultant of APSRI with 22 years of investment and trading experiences in financial markets. The expressions are solely his own. He can be reached at dar@pwforex.com

Date: 9 Jan 2011