(May 12, 2008) — Anyone can read today's stocks charts, but only real pros can accurately predict tomorrow's. They are the ones who make money, regardless of the market's ups and downs.
The same concept applies to doing business with and in China.
Some point out that China's economic growth is slowing down. That's true if you are a generic toy maker. But take a moment to step back, get out of the particular niche, industry, sector and region you happen to be in, and get a feel of the whole picture.
It's a picture of breakneck changes, more intense than ever. With the yuan strengthening against the U.S. dollar, steep inflation, tighter credit, stricter labor laws and fewer tax incentives, export businesses are shuttering plants while foreign investment is crossing China's southern borders for cheaper alternatives.
But on the other side of the table, multinational suppliers such as Sabic Innovative Plastics LP, Dow Chemical Co. and Conair Group Inc. are choosing China to launch products globally. Their China strategies are far from the cut-costs-and-ship-back-to-America formula. They understand there will always be a cheaper location, but China has two trump cards: scale — of market and, more importantly, of production; and adaptability.
Obviously China's large population means a tremendous domestic market, which at present is primarily supplied by domestic producers. In past decades, Western companies have made China an export powerhouse, but they have also been waiting patiently for the Chinese market to grow and upgrade to eventually demand higher-end goods.
Today, running on Shanghai's busy roads are not just tiny, $5,000 Chery cars. There are sharp-looking business vans, SUVs, sedans and sports cars, mostly from major international carmakers' China joint ventures. Demand for higher-end products is rising in the industrial sector, too.
I don't know how many in the plastic industry have heard of Yibin, China-based Push Group Ltd., but the state-owned conglomerate in western China supplies Coca-Cola Co.'s China operation with 2 billion preforms every year and makes car parts for BMW's Chinese joint venture. It also makes almost 20,000 tons of pipe and fittings annually, plus 11,000 tons of film, 440 million gift bags, and 1.2 billion pieces of plastic cutlery.
The company said one of its secret weapons is a first-class manufacturing model, with suppliers including Husky, Demag, DuPont Co. and Invista.
“Chinese companies can be just as sophisticated and advanced as everybody else,” said Carl Lu at the company's Shanghai office.
This is China. Garment and toy shops are closing, but modern plants are opening to serve the auto, industrial, packaging and electronics sectors. Banks are holding their pockets, but private lenders are backing up businesses. The Pearl River Delta is slowing down, but the eastern, northern and western regions are flourish-
ing. The dollar is working against exporters, but they now quote in euros and yuan. In short, people adapt fairly quickly.
China's big negatives — rapid change and endless uncertainly — are the best training for the finest businessmen, said a Taiwanese machinery firm owner.
The way I see it, China is becoming a stronger link in the globalization chain. It adds value by producing and consuming.
The World Trade Organization doesn't just open China's door to export to the global market. It also gives the world better-than-ever access to the Chinese domestic market.
Do you see your piece of the pie there?
Sun is a Plastics News staff reporter and Asia specialist.