As I’ve stressed before, doing business in China requires you to keep an active eye on Chinese government policies.
A joint research report by the Ministry of Commerce (MOC) and the Academy of Social Sciences (CASS) was released recently at the 107th China Import and Export Fair, in Guangzhou.
The report predicted that China’s foreign trade volume will hit $5.3 trillion (U.S.) by 2020.
As part of the number, merchandise exports would rise to $2.4 trillion, about 10 percent of the world’s total, and imports would rise to about $1.9 trillion, or about 8 percent of the world’s total. As part of the report, a number of other assumptions were listed:
China will more than double its foreign trade volume.
China needs to improve the quality of its exports.
China needs to reduce import tariffs.
The financial crisis revealed weaknesses in China’s economy which indicate a need to have more balance, meaning less reliance on low-margin, low-skill manufacturing and industries that will have negative long-term environmental effects on the country.
China needs to adjust its exports structure and focus more on high-end, higher-margin manufacturing, environmentally friendly industries, energy-saving initiatives and new service industry development
Although China reported a deficit of $7.24 billion in March, the first time in the past six years, it was suggested that decision makers lower tariffs, as a way of dealing with the nation’s trade imbalance.
China should increase imports of high-tech equipments, energy and resource products, agricultural technology and machinery and consumables as a way of productively addressing the trade imbalance.
China needs to play a more active role in the international trade arena.
Putting aside the usual doubts about how it is possible to predict the future, the importance of the report is that it indicates the assumptions will be used to chart China’s economic course over the next 10 years.
Why is this important to you? Because these policies will shape everything from taxation, economic incentives and environmental policies to new trade opportunities.
As you plot your business strategy, you also need to make assumptions. Part of them may rely on what is going on in China. Even assuming only part of China’s prediction comes true, where will your business be in 10 years? Given the list of things China is interested in, are there opportunities? When you look at the situation, remember to think beyond primary economic activities to the organizational and support services.
It is fine for China to say they wish to develop high-tech, high-margin businesses, but to do so will require an infrastructure that does not currently exist in China. Does your American firm have a solution for Chinese companies? If the answer is yes, think about how you could use the winds of change to provide solutions and make profits.
As I have said before and will continue to say, doing business in China means you have to pay attention to what the elephant in the room is doing.