domestic product GDP) expanding at the
slowest pace in nearly two years. GDP
growth moderated to 9.1 percent in the
third quarter from 9. 5 percent in the second quarter. Although this GDP level is
lower than in past quarters it is significantly higher than what has been achieved
by the U.S. or European countries during
the same time period. If we look at this
number from a seasonally adjusted, quar-ter-on-quarter basis, GDP rose 2.3 percent
following a revised 2.4 percent gain the
second quarter. China’s economy is the
second largest in the world after that of
the United States. During the past 30 years
China’s economy has slowly changed
from a centrally planned system that was
largely closed to international trade
within the country to a more open market
orientation that has a rapidly growing private sector. Even so, a major component
supporting China’s rapid economic
growth has been and continues to be “
exports growth”.
V. China Trade Surplus
In August of 2011 China authorities reported a trade surplus equivalent to 14. 5
Billion USD. As in the past, export
growth continues to be a major component supporting China’s economic
growth. Without a strong, vibrant export
focus China’s economy would collapse
overnight. For China, exports of goods
and services constitute 39. 7 percent of
GDP. Government data indicates that
China’s major exports for 2011 have
been office machines, data processing
equipment, telecommunications equipment, electrical machinery, and apparel
and clothing. China imports mainly
commodities such as iron and steel, oil
and mineral fuels; machinery and equipment, plastics, optical and medical
equipment and organic chemicals. Its
main trading partners are the European
Union, United States, Japan, Hong Kong
and South Korea. China has developed a
significant auto industry, which for the
most part has focused on internal demand. With the advances in “all electric
vehicles” it is likely that China will use
its formidable export expertise to pursue
markets around the globe.
Source: Blairgowrie Associates
Bottom Line
Although China is experiencing a bit of a
slowdown and inflationary pressures on
its economy it still offers more growth potential for most businesses than other
countries in Asia Pacific or Europe and the
United States. However, for the “new
comer” to China, expect to find higher
than expected labor, raw material and
general infrastructure costs along with increased competition from both international and local companies.
In essence, the risk associated with
doing business in China is somewhat
higher today than encountered by earlier
entrants. This is due in part to the emergence of a huge internal demand for consumer goods fueled by a growing middle
class as opposed to a somewhat insulated
economy based mostly on exports.
In addition local Chinese-owned and
operated companies are much more sophisticated and offer significant competition as compared to the past. China is no
longer an emerging or developing economy it is rapidly assuming its role as a true
global leader.
Although labor rates are still lower in
China than most other countries that picture is changing daily and is often offset
by the cost of other manufacturing elements. The companies that will be successful in China today are those that have
done their due diligence well, understand
the true risk of doing business in China,
have established clear routes to market access and offer new or unique technol-ogy/products and are prepared to assume
the risk of doing business in China for the
long-term. CW
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