New Opportunities for Chinese Suppliers?

Amid an EU debt crisis and slow U.S. recovery, the attention of many Chinese suppliers increasingly is turning towards the emerging economies of Africa and Latin America. This is the main finding of the recent survey “China exporters focus on emerging markets amid EU debt crisis” covering a number of established Chinese suppliers in industries including electronics, hardware, and textiles. OECD data on the recent sluggish export growth confirms the finding and explains why many Chinese manufacturers have set their sights on these new booming economies.

Untapped Potential?

It is true that many African and Latin American countries are still fighting with long standing problems such as underdeveloped infrastructure, scanty high value-added industries and a general lack of a service sector. Yet according to the IMF report Finance and Development: Africa’s New Engine, many of these economies have recently started to address issues such as better governance while improving on their economic policies towards building up their own more comprehensive welfare states and implementing more business-friendly regulations. Coupled with a favourable demand for primary commodities from BRIC countries, an emerging process has set in where a rising middle class of relatively young end-users are eyeing more consumption of durable products. Chinese manufacturers with adequate foresight should then be ready to seize the coming opportunity by increasingly tuning their marketing efforts to these new overseas clients.

Expanding China Sourcing: A New Trend?

There is no doubt that the Free Trade Agreement with ASEAN countries along with domestic policies aiming at boosting internal demand has allowed China manufacturers to cushion any slack in demand coming from its more traditional export markets in the West. While the former has the additional benefit of giving Chinese manufacturers a competitive edge and hence favor China sourcing in comparison with other direct competitors, the raising demand for better working conditions is likely to have a dampening effect since cost of production for Chinese manufacturers will be on the rise. It is yet to be seen however whether the Chinese government will pursue more free market policies towards these new flourishing economies, an initiative that could well be counter-productive in the long-run since it could potentially impact the demand for China supplies from its current stalwart markets in the West.

Nevertheless, suppliers are likely to take advantage of the emerging economic outlook. China sourcing is expected to increasingly cover product categories that have relatively higher added value. In addition, with reports such as this one from Global Sources: “China suppliers go ‘green’ to counter energy shortage”, there is a growing indication of a better positioning of Chinese suppliers among countries that present a broad range of environmentally friendly solutions to a world increasingly attuned to global climate changes. Ultimately though, the sine qua non condition for the success of Chinese manufacturers is how the Chinese government succeeds in accompanying the new wave of globalization with increasing institutional cooperation along with new cultural initiatives at both the foreign and domestic levels.

• Samir Benjelloun- CPG Marketing Intern