As a target for British exports, Chinese markets are only going to get more appealing, writes Jane Galvin, Head of Corporate Banking at HSBC UK
Businesses in the UK are nimble, entrepreneurial and well-informed and, while there remains uncertainty around Brexit at home, many are finding growth by taking opportunities to export their products and expertise overseas.
Last year, British business exported £629.4 billion worth of goods and services, proving that the power of ‘Brand Britain’ remains strong on the world stage. However, there’s still more to do to make sure small businesses are maximizing their returns from growth markets – and nowhere is this more true than in China.
HSBC’s “Made for China” report found only 27 percent of UK businesses currently selling to China view it as a top three future market, versus 46 percent globally. Additionally, only a minority (10 percent) of those that are considering selling to China see it as among their top three export markets in the next three to five years, compared to 15 percent globally.
Consumer tastes change quickly in China. As an example, eight years ago the country imported only about 30 tons of avocados, with the Central American fruit an exotic ingredient rarely appearing on Chinese dining tables. In 2017 China bought 32,200 tons of the fruit from Chile, Mexico and Peru – enough to make 200 million servings of avocado on toast.
Much has been said in recent years about the opulence of China’s new rich. China is becoming more sophisticated and inclusive as wealth spreads from urban centres to rural heartlands, bolstered by a better-educated new generation who is both web-savvy and worldly-wise.
HSBC’s Made for China report found only 27 percent of UK businesses currently selling to China view it as a top three future market, versus 46 percent globally.
There’s little doubt about the importance of China as a target market for UK businesses. According to official estimates, the country is set to import US$8 trillion worth of goods in the five years from 2018 to 2022. That’s an average of US$1.6 trillion a year – more than half the GDP of the UK in 2017.
HSBC’s annual Navigator report predicts that the value of China’s goods imports will grow at about 8 percent a year on average between 2017 and 2030, reflecting both a demand for intermediate goods for processing, and for final goods that satisfy the demands of China’s increasingly wealthy population.
All this is happening as China bids farewell to growth based on exports and state-led investments and increasingly encourages its 1.4 billion people to consume. Slowly but surely, the old model of “Made in China” goods heading to markets around the world is shifting to one where China is itself becoming a destination for products made elsewhere.
A perfect example of this rebalancing was the China International Import Expo in Shanghai. In the past, China-based trade fairs were all about what Chinese companies could sell to the world. This event, by contrast, was about foreign companies selling into China. For six days in November, several hundred thousand square metres of floor space was dedicated to international sellers, showcasing everything from food and medicines to consumer electronics and cars.
Last year British businesses exported £629.4 billion worth of goods and services but there’s still more to do to
To be sure, selling into a vast, complex and rapidly-evolving market like China is not without challenges. As the economy matures, incomes aren’t rising as fast as they once did. And today’s trade tensions naturally affect business and consumer confidence.
What’s more, foreign companies need to be able to react to constantly-shifting tastes and head-spinningly rapid developments in e-commerce and digital payment tools. And they need to brace for intensifying competition from nimble and increasingly high-tech local companies. UK businesses need support, connections and the right financing to help them either make the first step into trading overseas, or expand their already existing cross border presence
But none of this should obscure the enormous long-term potential that the Chinese population of 1.4 billion represents for UK businesses. From the millennial brunching in a Shanghai cafe to the parent purchasing diapers in a Hunan village, China’s consumers are becoming ever more affluent and discerning. Now, more than ever, they represent an essential market for businesses everywhere.
Jane Galvin is Head of Corporate Banking, HSBC UK, and Chairman of CBI East of England.