China economy

MOST BUSINESS PEOPLE tend to associate opportunities for doing business in China with the major cities of Beijing, Shanghai and Guangzhou. There are, however, increasing opportunities in literally dozens of regional cities, all of which have populations of over a million people and are expanding quickly. Recent research published by UK Trade & Investment identifies those cities, where the opportunities lie and how they match up with UK strengths in seven key sectors.

Urbanisation is one of the key drivers for much of the recent impressive growth of Chinas economy. This process is set to continue. Presently, around one-third of Chinas 1.3 billion population lives in cities and this is predicted to increase to around two-thirds by 2025.

Historically, business interest from UK firms has generally focused on the large cities because of their political and economic importance. However, these markets are becoming saturated, competition is intensifying and costs are increasing. It is not surprising that firms are considering alternative locations in China. Currently, there are around 270 cities with a population in excess of one million. These cities vary considerably, but all offer rapid growth, a low-cost base, large and developing consumer and industrial markets, unexploited new opportunities and local government support.

The surge in urbanisation presents challenges for the Chinese authorities – and, therefore, opportunities to British businesses – in a number of areas, including education, housing and infrastructure, healthcare, environmental protection and financial services. Consumer markets are also becoming increasingly sophisticated and demanding.To help focus business expansion into regional cities, recent research published by UK Trade & Investment identifies 35 cities that offer the greatest opportunities. The seven sectors identified to demonstrate UK strengths are: financial and professional services, environment and climate change, energy, infrastructure, information and communication technologies, life sciences, and advanced engineering.

“The British Consulate-General in Chongqing and the China-Britain Business Council (CBBC) office in Chengdu are well placed to support UK companies to realize new opportunities such as contributing towards reconstruction efforts in Sinchuan following Mays earthquake,” said Minister for Trade & Investment Lord Digby Jones. “In the larger coastal cities, markets are maturing, competition is intensifying and factor input costs are increasing. Cities outside of the ‘hotspots’, such as Dailan, Dongguan, Hangzhou, Qingdao, Shenyang, Suzhou, Tianjin, Weifang, Weihai, Wuhan and Yantai, offer some of the best overall business environments for the UK companies.”

Assessing the Opportunities

The research, commissioned by UK Trade & Investment and delivered by the CBBC and the Centre of International Business, University of Leeds, ranks cities for their attractiveness to business. The 35 cities were narrowed down from 274 and chosen for their economic size, growth rate and population. The research also provides and extensive list of sector-specific opportunities for each of the seven priority industries.

 A word of Caution

The rankings do not provide a single “right” approach to forecast success in one city over another and each business is different. However the research can help narrow down options and provide a short list. “UK companies need to focus more on the wealth of opportunities beyond the traditional business locations in China,” said Stephen Phillips, chief executive of CBBC. “They should get informed, be open-minded and seize these opportunities.”

Challenges

The research report also highlighted some challenges facing UK companies in these regional cities, principally around regular changes in government policy, market forces and operational barriers. Companies need to be well informed and well prepared and take a long-term, prudent view in developing business in China.

The regional cities survey can be downloaded from the UK Trade & Investment website www.uktradeinvest.gov.uk/ukti/chinacities

The China-Britain Business Council (CBBC) is the UK’s leading source of China business information, advice, consultancy and services for UK industry. www.cbbc.org