Future Trends



Dollars. Renminbi. Yen. Sterling. Euro. It doesn’t really matter what currency you deal in. If you want to make money over the coming decades, China will be the market to be in.
Many have heeded the message already. Foreign direct investment (FDI) in China has increased steadily since the turn of the century. In 2002, it topped $50 billion. In 2003, despite severe acute respiratory syndrome (SARS), FDI was $53.4 billion.
Furthermore, in the first half of 2004, FDI had already hit $33.9 billion according to the Ministry of Commerce, with projections for more than $60 billion by the end of the year. The trend is a clear one. The momentum behind China’s march onto the global economic stage gathers pace with each passing year, as the bandwagon collects yet more adherents.
Wang Xiao Guang, a specialist at the Academy of Macroeconomic Research – part of the State Development and Reform Commission – sees no let-up in FDI despite government efforts to cool the economy. He says: "Foreign investors will change their wait-and-see attitude and be aware that sustainable growth of China’s economy will benefit all."
To put the figure in context, the Organisation of Economic Cooperation and Development (OECD) said China had become the number one recipient of FDI in 2004, overtaking the US in the process.
With annual growth trends averaging a conservative 6.5 per cent up to 2020, according to Goldman Sachs’ Dreaming with BRICs: The path to 2050, it is a trend that also has the local OP sector salivating.
The grafting of Taiwanese technical know-how onto Chinese manufacturing processes will be further enhanced as the standards and norms of major global manufacturers infiltrate the market.
That presents a dilemma for Taiwanese manufacturers of course. They could find themselves out muscled by their Chinese cousins in the next decade. The dangers of marginalisation are already emerging.
Shiny CEO Jess Shih says: "It’s not actually just a problem for Taiwanese companies but also for global manufacturers. Because the conditions for cheap labour are likely to stay in place for some time yet, the competitive advantages that local manufacturers will enjoy will become more apparent as they catch up with global technology."
That will inevitably see Taiwanese companies allocate even more resources to marketing, branding, and research and development. Leos’, Shiny, Polar Bear, SDI, DataKing and Lion Pencil/Simbalion have all put these top of their agenda in the race to keep ahead of their counterparts and more will inevitably follow.
For Chinese companies, the interest in brand development and technology will be an inevitable goal in bridging the manufacturing gap. The kind of quality procedures already put in place by the likes of UTec in Zhuhai will quickly become the norm. That may well mean a significant own brand push which will to a lesser or greater extent impact on the established global brands.
And the result will eventually be a powerful manufacturing community, not only eager to take its place within the global OP environment, but also keen to police the worst of the counterfeiting.
Utopian? Perhaps, but a move towards that kind of environment in China will happen in the next decade. And not only will top manufacturers demand it, so too will customers and so too will OP resellers.
The likes of Wal-Mart, Metro and Carrefour for example are used to providing customers with excellent service, and they will expect their suppliers to match their requirements.
GBC Asia managing director Fred Moh says: "They are here to stay. Carrefour, Wal-Mart and Metro can leverage their expertise in supply chain management, merchandising, advertising and promotion as well as customer relationship management to tap into the market.
"And for them, one key criteria will be the effectiveness in local sourcing of Chinese manufactured goods. Supermarkets will succeed in China, be they foreign or local establishments."
Does that mean an OP channel dominated by the mass marketers? Unlikely. China is simply too vast for that and the cultural penetration of ‘guan xi’ is so deep that it will take a generation to see a significant shift in that. As for contract, it may take even longer to establish a real presence on the mainland.
As Officemate’s Martin Ma says: "The key problem that global players will have is not the competition from a leading national player such as Officemate, but from the enemy within. By that I mean the thousands of little local businesses in China in this channel already.
"The number is incalculable and it will almost be impossible to find them and take them on. In the short term, it is a minefield."
But the reseller channel is nevertheless shaping up for the future. The emergence of a specialist local market, represented by Officemart/O’Mart and OfficeBox, has now gone too far to be halted. Additionally, the toe-dipping of the global players is likely to become a full immersion now that Staples has, if somewhat covertly, entered the market. That will inevitably see Office Depot, OfficeMax, Buhrmann and perhaps even Askul take the jump soon.
Add to that the pioneering efforts of Office 1 Superstore International and the level of activity is significant. Meanwhile, the voracious appetite of the consumer in China will almost certainly ensure that the long-term branding efforts will ultimately pay massive dividends.
He may indeed not have known what he was doing in 1980 or 1992 but that Mr Deng Xiaoping has a lot to answer for.