ciie moment

CIIE: new awareness from the dialogue between China and the West

source: Capital magazine, Class Editori

From the second edition of CIIE – China International Import Expo in Shanghai, the fair in which we participated last November – several interesting points have emerged on China’s relationship with Western countries.

First of all, CIIE is the first trade fair ever organized by China dedicated to the importation of foreign products and services: a strategic action which fits well into the new Chinese economic strategy.

New investments for the Made in China 2025 plan

Made in China 2025 is a strategic project strongly promoted by President Xi Jinping that aims to strengthen economic cooperation and international trade in order to achieve an ever greater level of quality of life for the Chinese population, focusing in particular on technological innovation.

The key points are in fact a radical improvement in the technological level of Chinese industrial production and the growth in consumption of high value-added products; this aspect in partucular opens important opportunities for imports.

An evolving market

For Italy, from the analysis of the Centro Studi CeSIF of the Italy China Foundation, for Italian exports with China it emerges that machinery is recorded for one third of the total, followed by clothing and textile products (17.5%) and from chemical and pharmaceutical products (14%), while food products (1.9%) and beverages (1.1%) still have a marginal but certainly potential role.

For the made in Italy – which is no longer just fashion, furniture, food and wine, but also mechanics, transport, pharmaceuticals – it is a decisive moment: the interchange has exceeded 50 billion, the export / import balance is approaching and there is the concrete possibility that Trieste will become the maritime terminal of the Belt & Road Initiative.

For the Chinese market, in 10 years China spent 145 billion on European companies (Merics and Rhodium Group data). About 360 companies have been acquired, even industrial giants like the Italian Pirelli. Control or participation also concerns airports, ports, wind farms and football teams.

Therefore, many European companies already have very close business relationships with China and no one can underestimate this huge market: China-European Union trade is 1 billion a day and last year China was worth more than a tenth of the export. In addition, investment opportunities, even financial ones, in China have grown considerably since September, when restrictions on foreign holdings in local companies have been lightened.

Thanks also to the Made in China 2025 plan, further spaces for commerce are opening as the Chinese government decided to move the production system towards the high end and in the meantime favor the importation of consumer goods or luxury goods for a wealthy class that counts hundreds of millions of people.

In fact, Chinese consumers of the upper-middle class, the ones who can aspire to the made-in-Italy, are around 400 million, young mostly; in 2018 there was a + 32% of expenses for domestic consumption.

According to a study carried out by Bain and Company, Chinese’s purchases will increase at a rate of + 6% per annum, also thanks to wage growth that is expected to remain stable at 5% at least until 2030.

The need for appropriate training to work with China

The annual report of the Italy-China Foundation also reports the most important critical issues that Italian companies face on the Chinese market. Among these, in addition to the long-standing theme of the violation of intellectual property rights, there are difficulties connected to the management of cultural and linguistic differences.
This problem, still present, strongly confirms how companies need an adequate preliminary formative-informative path as a fundamental aspect in the business strategies oriented to the Chinese market.

For those who want to operate in China today, it is necessary to keep constantly updated on the dynamics of the country.

A golden rule before entering the Chinese market, if even more valid when it comes to small and medium-sized enterprises, is to enter into agreements with local distributors. In fact, it is essential to build deep relationships with Chinese partners in order to conclude business agreements.

In conclusion, for European and in particular Italian companies it is essential to catch opportunities in which Chinese companies need foreign technology in order to take part in global innovation.

Certainly, the differences in cultural habits and access to modern trade infrastructures in China pose an important but inevitable challenge.

photo: CIIE moment