Is the Chinese economy falling asleep at the wheel? It may not be what you want to hear on a Monday morning but the reality is beginning to set in – the Chinese economy is beginning to catch a slight cold and these are the really important things entrepreneurs and start-ups need to know:
The Chinese Government has tried hard in recent months to try and slow the challenging real estate sector where speculative growth is said to be out of control by many commentators. This of course has swing on effects that could impact on residential construction and therefore the building materials market but, the Government has been attempting to move the economy towards consumer spending.
While the economy has continued to expand the latest figures indicate that its 7.3% expansion in the third quarter is the slowest it has been since 2009. You might think that the growth rate is well above many countries (including the USA and Australia as examples) but for China it indicated a worrying slow down. That sign being economies who have long relied on China’s strong growth are also now seeing slippage in exports. Brazil and Australia are selling a lot less iron ore which may be a sign that the construction industry overall is slowing and then there is Indonesia selling less wood and oil as Chile’s copper exports begin to all.
The double edge sward could be the consumer electronics market and mobile phones where many Chinese are opting for lower cost alternatives that are manufactured at home which of course also create jobs. These products from manufacturers such as Huawei are proving technologically well made, consumer fit and cheap.
The reality is though that there are still areas of growth that are hook, line and sinker connected to the consumer market for one very important reason – as many more millions of Chinese reach the middle classes their disposable incomes have increased which is seeing a drive in increased consumptive spending from luxury goods to cars – which is exactly what the Chinese Government is really hoping for in terms of a shift.
For the United States the Chinese economy getting a cold is not as risky as many people would have you think because US Growth is not as tied to China as Australia, Brazil and even Europe. Paul Ashworth, an economist at Capital Economics said recently that: "It's hard to see a slowdown in China having a really significant impact on the U.S. economy, barring a complete collapse,"
So, if you’re entrepreneur, small business or startup then these are industries that you may want to be in when it comes to selling to and in China:
Tourism and travel: many more Chinese have a disposable income and want to see the world!
Hospitality and gourmet foods: more and more Chinese are eating out and they don’t just want to sit around a local McDonalds. They want to taste premium goods such as meat and vegetables and more importantly they want trusted brands
Luxury goods: Did you know that one third of all luxury Swiss watches are exported to China? An increasingly high disposable income equals a desire for luxury brands and goods that are not fake!
If China does get a cold then we should be worried less about what happens internally and be more concerned about those economies such as Australia, Brazil and Chile that could possibly have backed themselves into a corner where they need China more than China needs them. Watch this space!
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