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06 Feb 2014

New Year opportunities

Chris Davies

by Chris Davies

CEO, Europe International, HSBC

New Year opportunities

For potential European exporters, understanding China’s customs and cultural expectations is essential

Chinese New Year is a time of celebration. As Chinese communities look to the future, the Year of the Horse also offers a reminder to European business of the East’s potential.

Though Europe’s economic prospects have begun to improve, growth in the eurozone is forecast to be just 0.8 per cent this year, according to HSBC Global Research, compared to 4.9 per cent in emerging markets.

China is leading the way in the emerging markets. Although growth has eased from highs of more than 10 per cent, our economists still predict a rise of around 7.5 per cent this year, with many other Asian economies also seeing growth in excess of 5 per cent.

There are many reasons to think that China’s success will continue, helping to underpin the global economy

There are many reasons to think that China’s success will continue, helping to underpin the global economy. China is now the single biggest trader of goods in the world; its middle class is growing; and last year the leadership set out ambitious reforms to nurture high-tech industries, unlock private enterprise and encourage domestic consumption. Announcements early in 2014 – including new measures to support small domestic enterprises and to develop key pilot programmes in Qianhai and Shanghai to facilitate cross-border flows of the Chinese currency – show change is happening fast.

As China continues to grow, trading partners can benefit from its success. In addition, China is broadening its overseas investment as well as being more open to those who want to do business on the Mainland.

In 1980, just 20 per cent of Chinese people lived in cities. This has risen to more than 50 per cent and is still increasing. Creating new cities means building houses, telecommunication and transport networks, requiring raw materials, machinery and technology. Despite rapid development, China has fewer kilometres of railway track than the US had in 1880. It has more than 80 cities with a population of more than five million that have no underground rail system.

The average worker’s income in China is expected to increase seven-fold from close to USD2,500 in 2012 to almost USD18,000 by 2050. But China is starting to cater for all tastes across its population of 1 billion with luxury and everyday imports: from German cars, Scottish whisky or French couture for the super-rich to baby goods, convenience foods and bicycles for second and third-tier cities.

In 2013 nearly 100 million Chinese tourists took holidays abroad, spending more money than any other nation. Though other Asian countries remain the most popular destinations for the Chinese, European locations are battling for a share by translating signs, hiring Mandarin-speaking staff, and publicising attractions.

For potential exporters, understanding customs and cultural expectations in the world’s second largest economy is essential. Adopting the Chinese currency for trade settlement may also help.

At Chinese New Year, parents give children red envelopes containing money and wish them prosperity. For European businesses looking for the same, improving links with China will be essential to a successful Year of the Horse.

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