Should small business exporters be worried about the Chinese economy?
Despite the slowdown in China, small British businesses are continuing to do big business there in a range of sectors.
China is big news. Two-way trade missions with the UK have been increasing steadily, until China’s recent stock market crash threatened to temper some of that momentum. But those at the coalface don’t appear anxious about the slowdown in the Chinese economy.
Take specialist brush manufacturer Cottam. Ten years ago it started investigating a cheaper source of supply for its injection mould tools, which led it to China. More recently, it set up an office near Shanghai to demonstrate deeper commitment to the market and take over supplier relations (previously the China-Britain Business Council provided a go-between service). The next step is to start exporting its products, and Cottam is already in talks with potential Chinese distributors.
“Our aim is to grow our business in China,” says managing director Ben Cottam. “The economic slowdown doesn’t concern us – yet, anyway. The market cooling down is actually no bad thing as it had been growing so rapidly. And the currency devaluation helps with sourcing, making it cheaper to bring products to the UK. Exports might suffer, but that’s just international business.
“The bigger picture is the size of the Chinese market and its interest in western products. Even though China is a vast producer of goods, it has a huge appetite for European products because of our high standards for quality and safety, so we see huge potential for sales.”
Cottam is not alone. This week, the China-Britain Business Council (CBBC) hosted a China SME Forum in Nottingham – a national event where 100 UK SME delegates got a chance to meet 100 visiting business and government representatives from the Chinese city of Ningbo.
Ian Hambleton, managing director of Output Group and its offshoot Studio Output, was among the speakers at the event. His businesses specialise in communications, branding and video content for the technology sector in China, which is a huge growth area. Hambleton’s clients include Baidu and Tencent.
“Since expanding to China in 2012, the tech industry has begun to mature in its branding communications strategy,” he says. “Companies are starting to understand and appreciate the importance of telling the story of their brand’s cause and vision, rather than just talking about their products and services.”
While Hambleton believes the economic slowdown may affect traditional manufacturing in China, he sees nothing but opportunity for his own business, as the government ploughs funds into digital and technological innovation.
For VR Aviation Safety Partnership, which provides services for regulatory compliance in aviation and aerospace, there is an opportunity to capitalise on China’s growing appetite for western quality standards. Over the summer it provided two aircraft design certification workshops to Chinese aircraft manufacturer AVIC. Of the market crash, VR’s senior consultant Malcolm McMillan says: “We haven’t seen any problems in negotiation or payment, and additional projects are being discussed.”
Meanwhile, Sondrel’s business in China is growing at an impressive rate. It provides consulting services to semiconductor companies from two sites in the country – Xi’an and Shanghai – after opening its first office there six years ago. Today, two-thirds of its staff are based there and annual growth exceeds 30%.
“I continue to be optimistic about China,” says Sondrel CEO Graham Curren. “Commentators seem to focus on the lower GDP percentage growth rate, but if you measure the growth in dollars it is nearly three times the growth of 10 years ago and represents a higher proportion of world GDP growth than ever before, even at the current level of 7%.”
Sondrel plans to open a new, larger office in Xi’an later this year. “Our academy continues to be popular as a training ground for new engineers – all the graduates of this course are going on to well-paid jobs,” Curren says.
New developments in integrated circuit design, especially associated with the internet of things phenomenon, are heavily centred on China, he notes. “We’re looking forward to bringing the best of east and west engineers together to produce increasingly exciting products.”
So what can UK SMEs take away from these experiences and how can companies determine their own commercial potential in China?
Mark Hedley, a China business adviser at CBBC, confirms that any slowdown at a macroeconomic level isn’t filtering through to the UK businesses he deals with. “We haven’t seen any decline in the number of companies coming to us for help and support,” he says.
“If anything, it’s now more often a case of businesses wanting to take existing activities to the next level. We’re also seeing a steady stream of Chinese companies coming to the UK.”
CBBC has just hosted a seminar for JD.com, China’s second biggest e-commerce platform. “They came to find UK brands to sell,” Hedley says. “The consumer market, especially online, continues to grow at a healthy rate. There has always been a prestige factor in China for imported goods.”
Hedley sees export opportunities being particularly strong for those selling premium high street goods targeted at the growing middle class and products whose safety standards matter – from baby products, food and drink, and pharmaceuticals to technology. There are also good opportunities for those selling services, such as specialist marketing, branding and digital services, and businesses in the creative industries.
Research is vital though, Hedley warns. “It’s easy to get carried away with the size of the market with its 1.3 billion people (including 300 million middle class consumers) and its growth potential,” he says. “In reality, opportunities are not universal. But if you have the right product or service for China, there’s everything to play for.”
This article was first published on www.theguardian.com on the 24th September 2015.