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A postcard from…China: Rewards from reforms

WHEN TALKING to clients about opportunities for international expansion, the conversation almost always turns to China. Some of the predictions made about China’s prospects are truly staggering – one forecaster recently told me that within the next 15 years he expected a quarter of the world’s largest companies will be Chinese corporation – so it’s no surprise that many UK-based FDs are keeping a watchful eye on developments in the country.

The reality on the ground seems to justify the hype. During my recent visit to Shanghai and Beijing, I was impressed by the dynamism and ‘can do’ attitude that are so obviously expressed in both cities; characteristics that have been the building blocks of so much of China’s success over the past 15 years or so.

The Chinese can certainly teach other markets a thing or two. Take BDO Li Xin, our firm in China, as example. It employs 7,500 people (more employees than any other BDO firm in the world) and embraces gender diversity as well as anyone (there is a 50:50 male:female split at all levels including partner). And they are also fearless about investing, having grown the business by over 20% year-on-year for the last 5 years.

It was therefore with excitement and enthusiasm that we discussed strengthening the relationship and making it even easier for UK companies to do business in China and for Chinese companies to enter international markets.

And the opportunities are enormous. As Boris Johnson recently put it: “As China moves on to its next stage of development, there’s massive potential for businesses to export their expertise and to set up shop in this economic powerhouse.” Little wonder, then, that the British and Chinese governments are confident of doubling trade between the two countries to $100bn (£60.8bn) by 2015, and of course David Cameron has recently been in China to negotiate this.

Private sector opportunities from reform

The reform plans announced by the Chinese government in November are likely to play an important role in helping British businesses to achieve their side of this target. The Beijing authorities appear keen to expand the role of the private sector, with domestic and international businesses expected to be encouraged to enter sectors that have previously been controlled by the state.

This new approach, and the voracious appetite of the Chinese for technology from the West, could create opportunities for forward-thinking British companies in a wide range of sectors such as financial services, cleantech, creative industries, advanced manufacturing and healthcare.

The growth potential for mid-market businesses following international expansion is enormous. For many, the route to growth may well lie in emerging markets; yet despite these markets playing an increasingly large role in the global economy, just around 9% of UK exports are to the BRIC countries and the UK still exports more to Ireland than to China – a trend that according to a recent report, quite unbelievably, is forecasted to still be the case in 2030. To unlock their potential, UK businesses must capitalise on the opportunities provided by the increasingly important emerging markets, and expand with a combination of strategy and opportunism.

But it’s not all work and no play – the Chinese know how to enjoy themselves as well. So my final piece of advice for anyone travelling to China – avoid the Moutai, or be prepared to suffer the consequences!

Simon Michaels is managing partner of BDO

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