China, too great an opportunity to miss

May 19 2009 by Sarah Green, The Journal

THIS week the head of the CBI Beijing office is touring the UK as we run a series of briefings for companies on China and, from talking to companies, a number of themes developed.

The first was a confirmation that while China remains a sourcing opportunity, for most companies their interest has moved on to understanding China as a market. The growing middle class with money to spend is boosted by the return of young adults who have enjoyed a western education.

And climate change and environmental degradation are big issues for Chinese policy makers who are prepared to invest in buying the advice and technologies to help deal with these problems.

Most of the top level political leaders in China have a strong science background. They understand the environmental challenges and consequences for their country of not tackling them, and there is a ready market for UK companies with solutions to offer.

Interestingly, this also removes the sterile argument that there is no point our taking action in this country when China is just reinforcing the problem.

The Chinese economy has not been immune from the global downturn and growth this year will be in single digits, to their dismay, but still at levels that western economies could only dream of. The government has introduced a massive economic stimulus package but there remains some doubt as to whether this will be sufficiently targeted to have the maximum effect.

The stimulus is particularly aimed at boosting the Chinese healthcare system and this is another area attracting the attention of western companies.

But the credit crunch has impacted on smaller privately owned Chinese companies leading some UK businesses to move continuity of supply up their risk register. And there are growing sign the significant cost advantages of sourcing in China are rapidly being eroded.

We also picked up concerns from a number of companies that there were signs of growing protectionism, with markets not fully open to western companies.

But as one CEO commented, the same could be said of most industrial countries at this time.

And the other issue which dominated our discussion with regional companies was the perennial one of intellectual property protection, and the various strategies that companies were developing to tackle this problem.

But while different companies were developing different strategies to reflect their own particular situations, they had one thing in common: China was felt to be too great an opportunity to ignore.

Sarah Green is regional director, CBI North East