China's economic 'slow-down' shouldn't dissuade British businesses, but it does highlight other options across Asia.
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For years, UK trade with China has been on the up. The figures show an exponential increase in UK exports to the country over the past twenty years. China has risen from being the UK’s 26th largest export market back in 1999 to the UK’s 6th largest export market in 2017.
And the growth continues. In 2018 the UK Department of Trade announced that in the year to March 2018 UK exports to China had grown by an impressive 15.3%.
Indeed, last February Teresa May and the Chinese Premier agreed a new trade and investment review – met with claims that China and the UK are living out the “golden era” of economic ties that the UK government, under David Cameron’s leadership, pronounced in 2015.
The rise in UK exports to China has corresponded with the Chinese economy’s meteoric growth. Ever since 1978, when the country began to adopt free-market principles, its might has been increasing until, in 2011, it became the world’s second largest economy.
But China’s economy is slowing and this has sparked concerns. The IMF recently downgraded China’s growth forecasts, blaming weaker credit growth and the country’s ongoing trade war with the United States.
The billions of dollars’ worth of tariffs the two countries have imposed on each other’s goods over the last year have taken their toll. The IMF figures show that China’s economy is forecast to grow 6.2% this year, down from 6.6% last year and 6.9% the year before.
Even though there are finally signs the trade war could be reaching a conclusion, since a 90-day truce was announced in December, there are still serious concerns.
The IMF announced, in a report published on the first day of the World Economic Forum in Davos, that the likelihood that tensions could flare up again at the end of the 90-day truce has ‘cast a shadow over global economic prospects’.
Indeed, Trump has already threatened an increase from a 10% tariff to a 25% tariff on $200 billion worth of Chinese imports if, at the end of the 90 day truce, a deal has not been brokered between Washington and Beijing, which could potentially further damage the Chinese economy.
So is it time for UK businesses to look beyond China? This is certainly true, to an extent. We should not be blinkered about China. There are a myriad of opportunities within other Asian countries that we must not ignore.
There are four other major markets within Asia – namely the Indian Subcontinent, ASEAN countries, the Middle-east (GCC) and East Asia – that UK businesses should be looking to exploit.
India is a particularly exciting prospect currently. The country has a population almost equal to that of China but a GDP growth rate of over 7.5% - which is almost double that of China. UK exports to India grew by 31.8% in the year to March 2018. Historic ties between the two countries are strong and British goods are in high demand here.
Research from Barclays Corporate Banking has shown that in India 67% of consumers are more likely to buy a product if it displays the British flag.
Meanwhile East Asia is a large and wealthy society with high consumption rates, where UK luxury goods are in especially high demand.
Japan is the world’s third largest economy and already considers the UK an ally, based on long standing cultural and economic ties. Korea has one of the world’s fastest growing economies – larger than Russia’s, with a third of the population.
The ASEAN Region – the Association of South-East Asian Nations, including Singapore, Malaysia, Thailand, Vietnam and Indonesia – has a combined population of 640 million people and an economy worth over $2.8 trillion, with increasingly open internal trade.
Of the ten members of ASEAN, four are former British colonies and three of those are members of the Commonwealth. The ASEAN region is fast changing from a low-cost manufacturing destination to a pillar of strength of Asian GDP. The region is one to watch.
UK businesses have been heavily focussed on China and would be foolish not to explore the possibilities of exporting in any of these growing markets, especially as China’s growth slows – and if the trade war continues.
However, this is not to say China is no longer a lucrative export market or that UK businesses should be overly concerned by the slowing down of its economy.
Even if the trade war continues, the Chinese government is trying to stabilize the country’s economic growth by encouraging domestic demand, which will in turn reduce its reliance on US import goods and mitigate the impact of a trade war.
Furthermore, although the US-China trade war has inevitably damaged the country’s economy, it has also had its benefits.
While the Chinese government has been battling the US, this has encouraged Chinese consumers and businesses to look for import opportunities beyond the US, as the trade war has made US goods too expensive. UK products are included in this.
UK goods are still in high demand in China. The aforementioned research by Barclays Corporate Banking found that 73% of 25-34 year olds surveyed in China said a product showing the Union Jack increased their likelihood of purchasing a product.
It’s also important to note that if, as is generally understood, London and Beijing may be moving closer to reaching a trade deal for post-EU-exit Britain, this would offer a huge boost to the trading relationship between the two countries.
China is still an incredibly attractive and exciting market for UK goods. UK businesses should not be spooked by the slowdown of its economy – but they should also not be blinkered in their approach to Asia.
Other Asian regions, India, East Asia and the ASEAN in particular, present hugely exciting growth opportunities for UK exports also, that should be fully exploited.
Siddharth Shankar is a leading expert in trading with Asia and CEO of Tails Trading, an innovative new solution helping UK SMEs to export their goods to Asia. Visit www.tailstrading.com to find out more.