NEWS: 14 DECEMBER 2015
THINKING OF DEALING WITH CHINA IN BUSINESS? 2016 COULD BE YOUR YEAR.
China. Now the second-largest economy on the planet, meaning whatever is going on in Beijing, Shanghai and beyond, matters now more than ever before. With continuous ferocious upheavals in the world’s financial markets, recent research has shown that China could be the country to do business with. Why is this you may ask? We take a look at a number of factors contributing to why.
For decades, China’s economic expansion was spectacular, with 2010 seeing the economy’s annual percentage increase to double figures and output (in dollars) growing fivefold in the lead up to 2014– pretty impressive. Although this may no longer be the case as we come to the end of 2015, observers have still been expecting a growth of around 6% this year.
Of particular note, in July 2015, China’s exports were 8.3% lower than 12 months earlier – a worrying statistic for the engine of the economy’s expansion. As a result of this there have been some knock-on effects, including reduction in prices for the cost of shipping a container (i.e. from Shanghai to Rotterdam falling by a staggering 60% since July) – a decrease that will have a huge impact as China accounts for a massive 30% of the world’s entire container traffic.
So, how important is China to Britain? 8% of British imports come from China, although the country does not make it to the top five markets when it comes to exports, however, it is worth noting that British factories do export components which then go into finish goods sold to China.
This current slow-down in China could present a number of fruitful opportunities to UK businesses wanting to strike deals with China. And, as of October 2015, Manchester Airport achieved one of its top targets – securing direct flights to Beijing, with the new service scheduled to begin in June 2016 – due to be operated four times a week by Hainan Airlines. This is expected to provide a £50m boost to the Manchester economy, and open up links from China into the North, ultimately unlocking more of the potential of the Northern Powerhouse.
David Cameron commented on the new flights and potential for new economic partnerships between the North and China, saying: “We are committed to rebalancing our economy and building a Northern Powerhouse. China is a key trading partner for the UK and the partnerships being made today will see real investment going into the North. This is all part of this government’s plan to attract more investment and deliver economic growth to an area of huge potential.” – great news for us North West based businesses.
And, if the above isn’t enough to convince you of the benefits of dealing with China, we have one more fact under our belt. China has officially launched its new global clearing platform for real time renminbi (RMB) settlement, known as the Cross Border Interbank Payment System (CIPS). The introduction of CIPS is expected to be a catalyst for growing cross-border transaction volumes in RMB – the fourth-most active payment currency in the world and the second-most used currency in trade finance. These measures, that have been taken to strengthen the Chinese currency, means that it is set to become an even bigger internationally used currency than it is already – which could prove to be of benefit to UK businesses.
So, with easier travel, more currency options outside of the usual GBP and USD, potential cost benefits to UK importers and a slowdown in the Chinese economy in mind, 2016 looks to be the ideal time to take a look in China’s direction as a UK business.
For decades, China’s economic expansion was spectacular, with 2010 seeing the economy’s annual percentage increase to double figures and output (in dollars) growing fivefold in the lead up to 2014– pretty impressive. Although this may no longer be the case as we come to the end of 2015, observers have still been expecting a growth of around 6% this year.
Of particular note, in July 2015, China’s exports were 8.3% lower than 12 months earlier – a worrying statistic for the engine of the economy’s expansion. As a result of this there have been some knock-on effects, including reduction in prices for the cost of shipping a container (i.e. from Shanghai to Rotterdam falling by a staggering 60% since July) – a decrease that will have a huge impact as China accounts for a massive 30% of the world’s entire container traffic.
So, how important is China to Britain? 8% of British imports come from China, although the country does not make it to the top five markets when it comes to exports, however, it is worth noting that British factories do export components which then go into finish goods sold to China.
This current slow-down in China could present a number of fruitful opportunities to UK businesses wanting to strike deals with China. And, as of October 2015, Manchester Airport achieved one of its top targets – securing direct flights to Beijing, with the new service scheduled to begin in June 2016 – due to be operated four times a week by Hainan Airlines. This is expected to provide a £50m boost to the Manchester economy, and open up links from China into the North, ultimately unlocking more of the potential of the Northern Powerhouse.
David Cameron commented on the new flights and potential for new economic partnerships between the North and China, saying: “We are committed to rebalancing our economy and building a Northern Powerhouse. China is a key trading partner for the UK and the partnerships being made today will see real investment going into the North. This is all part of this government’s plan to attract more investment and deliver economic growth to an area of huge potential.” – great news for us North West based businesses.
And, if the above isn’t enough to convince you of the benefits of dealing with China, we have one more fact under our belt. China has officially launched its new global clearing platform for real time renminbi (RMB) settlement, known as the Cross Border Interbank Payment System (CIPS). The introduction of CIPS is expected to be a catalyst for growing cross-border transaction volumes in RMB – the fourth-most active payment currency in the world and the second-most used currency in trade finance. These measures, that have been taken to strengthen the Chinese currency, means that it is set to become an even bigger internationally used currency than it is already – which could prove to be of benefit to UK businesses.
So, with easier travel, more currency options outside of the usual GBP and USD, potential cost benefits to UK importers and a slowdown in the Chinese economy in mind, 2016 looks to be the ideal time to take a look in China’s direction as a UK business.
