China to World

Why do Business in China

Noting the brilliant economic data, overwhelming demographics of the country and its huge industrial production capacity, it looks like an enormous potential for doing business with China.

The emergence of the current global economic crisis has meant that Western countries have begun to look to China not only as the world's factory but as a huge market full of opportunities for their products.

Some facts about China:

• Population 1.3 million (official data).
• In the past 25 years, real gross domestic product has grown at an average of 9% annually.
• The growth in foreign trade has averaged 15% annually since 1978.
• Investment bank Goldman Sachs predicts that China's economy will reach the United States around 2025.
• Every week more than 1,000 billion dollars in FDI (Foreign Direct Investment) flows into the country.
• A growing wealthy class with an interest in Western luxury brands.

However… where are the results?

Doing business in China is actually neither easy nor suitable for those without experience in the country. Culture and administrative barriers apart, there are strong logistics obstacles; although major cities and coastal areas are easily accessible, inland markets offer great challenges to the transportation and storage of goods.

Another point to consider is the low levels of income per capita which in which in 2010 stood at around $ 4,000. To get an idea, income per capita in the United States is in the same year was $ 47,000 and in the European Union, $ 33,000.

One more obstacle for the Chinese families to consume more goods is their high savings rate (proportion of the disposable income that is not spent), placed at 50%, if we compare to the 10% of the USA or the 15% of the European Union.

So then, what industries offer business opportunities in China?

Currently there are numerous business opportunities in China, especially in retail, health, technological innovation and education services. Foreign-funded enterprises account for 54% of Chinese imports, although in some sectors, such as food products or education, it is very often required a local partner.

Before taking the plunge, it is recommended to consider several issues including the importance of public sector in the country or the need to know in depth the industrial policies (and their requirements and possible exceptions). It is important to notice the chances offered by the selective investments of the Government, mainly to areas of clean energies, high technology and R&D. On the contrary, foreign investments in low added value or highly polluting sectors are discouraged.

Areas offering most opportunities:

• Industrial goods: machinery and equipment, auto parts, chemicals, medical equipment and supplies, railways and other means of transport.
• Renewable energy: smart grids, waste and water treatment and construction materials.
• Consumer goods: mainly food products, especially pig meat or fishery products, wine and olive oil.
• Fashion and luxury: footwear and leather goods, clothing, cosmetics, furniture and lighting design.
• Services: education stands out, including opportunities for business schools, language academies, computer schools, recruitment of Chinese students (for undergraduate, graduate and professional). There is also potential for architecture and design services and tourism.
• Sectors with the highest demand for foreign investment: renewable energy, franchises and tourism.

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China to World is the Passport to Success of your China Business