East meets East: Why China should be a top destination for region’s exporters
The UK’s trading relationship with China has gone from strength-to-strength in recent years, writes Alan Pain, head of exports for the East of England at the Department for International Trade.
Exports have risen by over 15 per cent across the last year alone, making China our fifth largest trading partner.
This is partly due to growing appetite for British products among China’s expanding middle class, which is expected to reach a population of 600 million by 2020.
A report released by Barclays Corporate Banking earlier this year revealed that demand for British-made products in China has risen by 36 per cent over the past five years, with Chinese consumers perceiving British products to be of ‘superior quality’.
This increase contributed to East of England exports to China reaching a value of £2.7 billion in the first quarter of 2018 alone. In 2017, China imported more than £12 billion worth of goods from the region – an increase of almost £3 billion compared with 2016.
The wealth of opportunity, both existing and emerging, for businesses in the East of England is clear and many local businesses are already tapping into the demand and exporting their products to China.
However it can be hard to know where to start and there are a number of key things to consider when building a strategy for international trade in China, going beyond concerns about language barriers and geographical time differences.
For example, firms must be aware of a concept referred to in China as guanxi. This refers to the importance of interpersonal relationships in Chinese business culture.
In addition, businesses must avoid viewing the Chinese market as a single, homogenous entity. China contains a number of distinct regional economies and as such, companies looking to maximise their products’ success will have to carry out careful research.
One firm which has capitalised on Chinese demand for its goods is SG Controls. The Cambridge-based company designs and supplies equipment for the optical fibre manufacturing sector.
Optical fibre is used to transmit information from one place to another and is a fundamental part of the mobile telecoms and internet infrastructure. At the moment, half of the world’s optical fibre is going to China as they are installing cables across the country.
The business is set to double the volume of products it makes and has also created 40 new jobs at its site in Newton, Cambridgeshire in the last 18 months following a surge in international demand.
Exporting to China hasn’t been without its challenges for SG Controls. For example, designing and supplying the multiple towers involved in its projects involves high costs, and the business initially struggled to find the funding capacity to take on new contracts, with international customers reluctant to invest large amounts without a form of financial guarantee.
However the company worked with the Department for International Trade (DIT) to help it overcome these issues. It was also supported by UK Export Finance, which provided the financial support it needed to fulfil the significant order in China. DIT also provided introductions to potential new customers, to further boost its exports.
For businesses looking to export to China, we have a team of International Trade Advisers located across the East of England to help businesses navigate any new challenges.
• Companies can find information and a current list of opportunities through visiting great.gov.uk or contacting DIT East of England
E: eastinfo [at] mobile.trade.gov.uk
T: 01707 398 398