Our overview of the China Market

The present growth and future potential of the China market of 1.3 billion people is well known. Whilst China’s economic growth has lagged behind the West in the past, she is playing catch-up – a process accelerated by entry into the World Trade Organisation and the psychological boost provided by the award of the 2008 Olympics to Beijing. Pundits are fond of suggesting that if China is not yet the world’s greatest marketplace, it very soon will be.

But China is not the West. The opening up of the Chinese economy creates internal problems and tensions as old habits jostle with western-style management and systems. Whilst Starbucks might now feature on the streets of Beijing, there are still different ways of doing business and the directors believe that it pays the Western investor to tread cautiously in this booming economy. And the caution is not all one way. Much has been written about the dangers of Western companies getting their fingers burnt but the Company sees evidence that there is equal and opposite suspicion by the Chinese. Finding the right balance needs local knowledge and local connections. 

The scale of the China market both is both its main advantage and its main disadvantage. The advantages of scale are obvious but it may be hazardous to approach China as one homogenous market – the pace of development differs from region to region whilst the town/country divide is widespread. The “honey pots” of Beijing and Shanghai may need to be regarded with caution. Of course, the potential of both these vast and expanding cities is considerable but, then, so is the competition (and the hype). Focus and a realistic analysis of competitive advantage are both very important.

Our choice is to focus on an area which we know best and where we believe we have the greatest number of contacts - Guangdong province in South China. Whilst this province includes China’s third largest city in its capital Guangzhou (which has some “honey pot” characteristics of Beijing and Shanghai), we believe that the glare of competition is less fierce and that the region as a whole has considerable potential.