Caixin
Nov 07, 2018 09:21 AM
DOING BUSINESS IN CHINA

All the Right Movements: Now’s a Great Time to Be an Importer

With the first China International Import Expo in Shanghai flooding the airwaves this week, it seems only right that I should jump on the bandwagon and write about this seminal and historic event destined to go down as a key moment in modern Chinese history. Anyone detecting just a hint of sarcasm in that grand opening would be on the mark, as I do think this latest “signature” event from Beijing is just a tad heavy on symbolism and perhaps just a spot light on substance.

But that said, I do think this “Tale of an Expo” also offers important lessons for people doing business in China, and could provide big opportunities for people who play their cards right.

For the uninitiated, which probably includes anyone outside China, the expo that has taken over China’s airwaves and Shanghai’s streets is a government-run mega-event spotlighting the latest policy priority from Beijing. The six-day show, which has been condensed into the four letters CIIE, in keeping with China’s fondness for acronyms, features 1,000 exhibitors and is expected to attract some 150,000 to its halls, according to its website.

Admission is also free for industry professionals, driving home the message that China is serious about boosting its imports and wants to keep out gawkers who lack the means to, for example, import Persian rugs costing thousands of dollars each.

The backstory to this is that China has come under fire, most notably from U.S. President Donald Trump, for a massive trade surplus with both America and the world due to the nation’s past obsession with exports to fuel its rapid growth. Imports in the past were seen largely as a necessary evil, and were actively discouraged for years through things like currency controls and high tariffs.

Consumer goods like makeup and foreign liquors were considered frivolous and unwanted by Beijing, which preferred to import products such as heavy machinery and soybeans that were necessary to feed the country’s economy and build infrastructure to support its growth. But all of that seems set to change now, at least that’s what Beijing is signaling with this major event that is full of the usual pageantry even as many observers remain skeptical of much substance. 

All that said, there certainly must be a business model out there for those opportunistic people looking to make a little hay while this new beam of sun shines on importers. That brings me back to my central theme for this week, namely on how this kind of signature event can actually offer some potentially lucrative business opportunities for those who can move quickly.

Land of movements

The reality is that China is a land of movements, which I’ve touched on in previous columns, and most of those movements originate from Beijing. Every movement has its purpose, from controlling China’s population with the family planning policies of the last few decades, to the desire to liberalize the country’s financial system through the more recent establishment of a number of free trade zones.

I’ve said in the past that one of the keys to doing successful business in China is aligning yourself with government priorities, and nowhere is it easier to spot the biggest priorities than in these movements. Imports may be the priority of the moment, but it’s certainly not the only one to take the business world by storm these past few years. Other movements have seen Beijing call for development of artificial intelligence (AI), robotics and devices powered by new energy sources, among others.

The trick, as many Chinese companies have figured out, is to align yourself with these movements, or at least look like you’re aligned. Doing so can help you become the beneficiary of all sorts of preferential treatment from Beijing. It also could help you get business from the nation’s vast complex of state-owned enterprises that see one of their central missions in life as helping to make Beijing’s dreams come true.

In that context, it’s no surprise that every company under the sun that sells anything computer-related has suddenly become an “AI expert”, and that anyone who creates energy-powered devices has suddenly become a “new energy” or “green energy” specialist. I even stumbled on a brand of “Chinese Dream” liquor a few years ago when “The Chinese Dream” was one of the government’s key campaigns, even though a friend later told me he thought the product may have predated the movement.

The bottom line is that China’s government has lots of money, much of it saved up through years of trade surpluses, and is happy to spend it generously on its latest campaigns. And as I’ve said already, the nation’s vast web of state-owned banks, manufacturers and other enterprises will also happily make loans for and shell out big bucks to buy products they may not necessarily need just to please Beijing.

That said, now is probably quite a good time to be an importer, even if you’re a foreign business that has never imported before. I say that with slight sarcasm, but only slight. For example, a consultant that helps big companies build rooftop solar systems might suddenly find much more interest in her services if she could find ways to shift to more imported supplies for things like solar panels for her systems. E-commerce giant Alibaba knows the game well, and on the show’s second day was quick to announce a plan to facilitate $200 billion in imports over the next five years.

The downside of this “government-agenda business model” is that such agendas frequently change, since they’re often not based on any real market forces. Today it’s imports and “One Belt, One Road,” but there’s certainly no guarantee those will be agenda-setters in a couple of years, especially if China’s economy slows sharply. At the end of the day, the best you can really do is move quickly to catch the latest government wave, and make as much money as you can before Beijing moves on to its next big cause.

Doug Young has lived in Greater China for two decades, including a 10-year stint at Reuters, where he led China corporate news coverage. Send your questions or comments to DougYoung@caixin.com


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