China, India, Brazil and Russia are known in economic business terms as the BRIC economies, developing markets in which businesses have the opportunity to flourish. Consequently, many businesses have set up operations in these countries, as well as utilising their factories and resources to source key elements for export to other markets. China is one the largest sources for international trade, and America is the biggest importer of Chinese goods. The American trade deficit with China has grown from $10 billion in the 1990s to over $200 billion in 2011, this essentially means that America imports over $200 billion more than it exports; the inter-dependence of these two global economic titans significantly favours China. The recent legislation which states that China is under valuing the RMB, making Chinese goods cheaper for American companies to buy and ensuring a continued increase in exports, conveys the belief among many developed nations that sourcing from and outsourcing to China has led to a rapid decrease in job sustainability inside the US and other developed economies. As long as the RMB stays low against the dollar, the incentive to buy, trade and produce within the USA is reduced; it’s simply not as cost effective as sourcing materials from China or outsourcing whole operations to the Chinese mainland. However, this balance is a difficult one to maintain; should the cost of importing from China increase, factories and businesses will begin to move to the next cheaper countries.
While production in China is often not as cheap as other countries such as India and Vietnam, the country remains a primary focus for business and trade because of its high productivity levels and willing workforce. Indeed it’s fair to say that while the BRIC economies are at the heart of all major corporation growth plans, they do not see them as equally interesting, ‘several companies are placing more emphasis now on China than on Russia because they see it developing more quickly, operating with more favourable trading patterns and with a government willing to invest in its infrastructure,’ Andrew Turton, Global Development Director of TNS Automotive. The ‘China phenomenon’, China’s fast developing economy and significant position on the global platform is linked in large part to businesses in other countries sourcing materials from China or outsourcing whole units of operation. Both provide significant economic benefits to the country. While most people have a sense of what outsourcing means the concept of sourcing is often less well understood; briefly by way of explanation, there are many types of sourcing but the most common is a procurement strategy for acquiring materials from countries with lower labour and production costs in order to cut operating expenses. In this model, production still takes place elsewhere; an example being Australia’s acquisition of copper and other metals from China. Other examples of sourcing include production of goods: the well-known ‘made in China’ stamp, and procurement of goods on mass.
Every April and October, China holds a massive trade fair in Guangzhou, which has become the factory and production focus of Chinese trade. The 110th Canton fair is taking place between October 15th and November 4th and is a valuable opportunity for businesses sourcing from China to explore the variety of products on offer. This also allows companies to observe the standard and quality of the goods that they intend to export from China. This is an important factor in trading with China, ‘as long as the company has a heavy involvement in the country, it will be done ethically. As long as you ensure it is ethical, it’s a fair trade. It’s often much more expensive to produce inside their own country, especially for Western businesses. Why would a company pay ten times the price?’ commented Serene Wong, CEO of TNS Research International.
The Canton fair is divided into three stages which are spread over the three week period. The first stage focuses on machinery and electronic equipment, the second on home and decoration and the third on textiles, garments and fashion accessories. The scale of the fair is considerable; covering several floors and a large surface area, Canton fair is the largest trade fair in China. The fair brings additional revenue to the Guangdong province, as tradesmen from across the world come to visit the fair and hotel prices escalate. ‘The fair is a great opportunity to see what’s on offer and how certain markets are expanding and evolving. Exporting from China is lucrative because it is cost efficient and quick; the Chinese have developed a lot of great methods for production’, Laura Milot, ERC.
Due to production costs, companies often design goods within their own country and have them made in Chinese factories. However, this has become a huge opportunity for the Chinese to learn about the designs and products of other companies and as such, the innovative drive in China is increasing and the speed at which China is developing inside of the country is extreme. Shanghai is a show case for this development - the skyline is constantly changing, the opportunities for professional development continue to evolve and many more businesses are beginning to establish offices in Chinese cities, including lower tier cities where potential growth can be maximised. Chinese products are consumed around the world, which has the effect of significantly boosting the economy. Consumption within the country is also escalating and the Chinese are quickly becoming one of the world’s largest consumer cultures. In the past, China produced to feed the consumption needs of the west, this is now changing as China’s middle class continues to increase and mass urbanization has served to shift the need-want ratio. More and more, foreign brands are bringing their products to China to sell to the increasingly eager Chinese consumer. With a population of 1.34 billion people in China, foreign brands see a great potential in the Chinese market. China’s position as the world’s single largest economy is only just around the corner.
The ‘China phenomenon’ is a continued source of interest to economists and social anthropologists, as well as much of the developed world. China is far more than an emerging market; it is a catalyst for progression, innovation and new process of thought. The Chinese do business in the present, sustainability is not a key area of concern and as a consequence the country is able to seamlessly evolve with the ever changing demands of the digital age.
