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New initiatives aimed to stimulate the global economy and growth in consumer spending are two of the many reasons why Asia Pacific remains a desirable region for companies to do business
Despite mixed views on the state of China’s economy, companies willing to be flexible and patient are reaping the benefits of doing business internationally
The juggernaut is over: that’s the spin many media outlets have used in reporting on the slowing of the Chinese economy, with the implied message that businesses should think twice before putting their eggs in one basket and investing exclusively in Asia Pacific partnerships—but there are things wrong with this viewpoint.
Few, if any Canadian companies have risked their fortunes on Asia at the expense of commerce with other nations; and even more to the point, current Chinese economic growth is disappointing only by that nation’s own standards—by any other measure, anything more than three per cent growth is robust; and in fact China’s growth last year was more than double that.
Therefore, most experts agree that taking the long view is vital to Asia Pacific business, both in terms of weathering downturns and in building trust between partners. With this in mind, HSBC’s 2016 RMB internationalisation survey shows that Canadian businesses are underestimating the importance of renminbi payments in improving their relationships with Chinese business partners. In fact, Canadians are the second least likely—after South Korea—to appreciate a business or relationship advantage in using the renminbi (22 and 29 per cent respectively, versus the global average of 40 and 44 per cent respectively).
Moreover, even though the number of Canadian businesses using the renminbi rose from three to seven per cent last year, this is well below the global average of 24 per cent (according to the survey, which polled 1,600 decision-makers across 14 countries). This is despite global businesses finding the currency much easier to use and experiencing much less headaches moving funds.
These disclosures trouble Linda Seymour, executive vice president, commercial banking, HSBC Bank Canada. “This could be partly due to wider concerns around China’s economy or short-term volatility of the renminbi, which is why it’s important to understand specific benefits to a business, from hedging to risk and liquidity management,” she says.
Seymour stresses that, “Canadian companies, and all foreign companies doing business in China, have to be nimble, able to adapt to the constantly changing spending preferences of Chinese consumers and be prepared to deal with periodic stock market volatility.”
When asked what specific steps companies can take to improve relations with business partners in China, Seymour replies: “Common factors among companies that are successfully doing business outside Canada’s border have foreign market knowledge, innovation capabilities and international networks. Interestingly, China-Canada bilateral trade only accounts for a small part of both countries’ total foreign trade, so there is room for growth.”
According to Seymour, some areas of opportunity for Canadians are: Urban Infrastructure: China’s target is to have 60 per cent of its population living in cities by 2020. That means a continued, big need for investment in urban infrastructure. Consumption: While conceding that the days of double-digit economic growth may be over, Seymour points out that salaries are still rising: “While consumer appetite for some goods or brands may have dropped off, a lot of cash is simply shifting to other product categories.” Heath Care: Health-care spending alone is estimated to grow to $1 trillion in 2020 from $357 billion in 2011, “and the [Chinese] government has signalled that foreign investment will have a role to play,” says Seymour.
Another thing Canadian companies should keenly be aware of is the Belt and Road series of policy developments and infrastructure projects designed to spur $2.5 trillion USD of cross-border commerce.
First laid out by Chinese president Xi Jinping in 2013, the Belt and Road blueprint aims to develop two corridors linking China to the world: the historic overland Silk Road trading routes connecting China via central Asia to Europe and the Middle East (the Belt’), and the maritime equivalents to the south linking China, Southeast Asia, India and Africa (the Road’).
“Belt and Road projects are already presenting opportunities for companies that can help develop physical infrastructure such as highways, ports and telecommunications,” says Seymour. “But these are only the first steps. By boosting connectivity, Belt and Road will catalyze trade between more than 65 countries that are home to nearly two thirds of the world’s population. For any company seeking growth and new customers, that’s an exciting proposition to explore.”
Unfortunately, the 2016 RMB internationalisation survey reveals that just 41 per cent of those polled understand the opportunities presented by the Belt and Road initiative, and only seven per cent realize businesses are working on a strategy. “That’s a lot of business and money to miss out on,” says Seymour.
While Seymour urges the Canadian business sector to be more informed about opportunities in Asia, higher learning institutions such as Trinity Western University (TWU) continues to boost B.C.’s presence overseas via its Great Wall MBA program, which is delivered in English at Tianjin, China’s Tianjin University of Finance and Economics (TUFE).
The 18-month Great Wall program, which teaches strategic leadership and provides a solid foundation in core business areas via analysis of theories and how they apply to real-world solutions in China, is an ideal way for future business executives and entrepreneurs to experience the Pacific Rim first-hand.
Better still, the program’s limitation of about 30 to 35 people yearly, results in a dynamic learning environment; plus, TWU’s B.C./China partnership is augmented by varsity teams from each country crossing the Pacific and engaging in sporting events. “It’s fun, it’s popular and it’s another way to learn about our respective cultures,” says TWU’s MBA director Murray MacTavish.
MacTavish says his Langley B.C. campus and TWU’s Richmond campus continue to work hard to make people aware of the Great Wall program. “The program’s third cohort is currently underway and we’re recruiting for our fourth; and even though China’s economy is down and the nation is undergoing massive fundamental shifts towards a service-oriented model, there is still enormous social and economic gains to be had in Asian Pacific investment—and we’re proud to prepare people to take advantage of those opportunities.”
In fact, with regards to hosting exchange students, Asia overall holds tremendous promise. “China and India are the west’s two biggest partners, but Vietnam is beginning to open up and Indonesia is growing slowly too,” says MacTavish. “At a time when the political sentiment in so many western countries is to close borders and discourage trade, we’re encouraged by the interest younger people have in immersing themselves in other cultures.”