In a speech that contained several veiled digs at US President Trump’s trade policy, Chinese President Xi Jinping kicked off the first China International Import Expo (CIIE) in Shanghai on Monday with a pledge to boost imports.
Calling the expo “an important decision made by China to pursue a new round of high-level opening-up”, he outlined that China’s priority is to widen market access to the rest of the world and demonstrate its position of “supporting the multilateral trading system and promoting free trade”.
The main takeaway from the speech was a pledge to import at least US$30tn of goods and US$10tn of services over the next 15 years in a bid to satisfy ever-increasing domestic demand. Although this is a marked increase from a statement at the APEC CEO Summit last year, when the Chinese president targeted US$24tn of goods exports over the coming decade-and-a-half, some onlookers see imports rising even further.
Speaking to GTR, Tianjie He, senior economist at Oxford Economics, says: “The goal of importing US$40tn of goods and services in the next 15 years is not ambitious in our view – in our forecast, China will import US$72tn of goods and services, of which US$64tn are goods, in the coming 15 years.”
While vice-premier Liu He had raised hopes of more reforms this year in his January speech at Davos, Xi did not outline much in the way of concrete initiatives at the CIIE, instead repeating stock lines around China’s opening-up, advancing an open world economy and supporting economic globalisation. However, a statement that foreign equity caps will be raised in the education and medical service sectors was welcomed by investors seeking to capitalise on China’s huge supply gap.
“There are meaningful steps undertaken, such as lowering tariffs and increasing caps on foreign ownership of companies. These should support imports going forward,” says He. “As to where more imports are going to come from, China’s consumer market has great growth potential. Changing demographics and rising affluence of Chinese consumers will boost demand for higher quality, more customised consumer products and services.” She adds that growth areas include but are not limited to household appliances, cars, healthcare, education, recreation, travel and tourism.
“Chinese consumers haven’t just become richer,” says Helen Wong, chief executive for Greater China at HSBC. “They’ve become more health-conscious, more concerned about the environment and more discerning about brands and the quality of what they buy. This is about a growing middle-class buying avocados and wearable digital devices – just like middle-class consumers in Europe or North America.”
In HSBC’s Navigator: Made for China survey, launched Tuesday at the Expo, the intersection of international businesses’ growth ambitions and China’s increasingly affluent and discerning consumers is clear. In September, the survey canvassed the views of 1,205 small and large companies in 11 key global economies that already export to China or are considering doing so.
The results show nearly half of businesses that are currently selling to China see it as a top-three destination to expand their business in the next three to five years. In the US, that figure rises to 58%, and among manufacturers globally it is 51%. Indeed, despite the ongoing trade spat, US companies seem more positive about the Chinese market than their European counterparts, with four out of 10 US companies surveyed saying they believe that China will be their most important market, compared to only 15% in Europe.
This is also mirrored by the level of comfort demonstrated by companies in selling to China: 43% of European companies surveyed by HSBC said they face challenges in understanding the local business culture there, versus just 33% in the US.
“To succeed in the future, international businesses must be ‘Made for China’,” says Stuart Tait, Asia Pacific regional head of commercial banking for HSBC. “China is no longer just the world’s factory; its fast-growing consumer market is prompting international businesses to re-evaluate how and what they sell to China. While made-in-China goods are found in-store and online around the world, the rapid development of China’s economy means that Chinese consumers are shaping the strategies of international businesses. These companies need a new playbook: ‘Made in China’ is no longer enough; they and their products need to be ‘Made for China’.”