Happy Year of the Rooster. Welcome back from what was a consumption-driven Lunar New Year break with spending up 48.1% from last year.
Much of the crowing leading into the Rooster was about China taking the lead in driving global trade as other major economies speak of regressive trade policies.
“Pursuing protectionism is just like locking oneself in a dark room. Wind and rain might be kept outside but so are light and air,” noted Xi Jinping at Davos. Whilst President Xi’s speech and much of the subsequent media commentary is cheerleading China’s stance on trade, it should be tempered with some facts and developments illustrating that China may be coming to the party, but the punch could still do with more fruit.
While the much-heralded Free Trade Agreements can be a boon for exporters, many non-tariff measures such as regulatory barriers, inconsistent application of import rules between different ports, and lengthy, uncertain processes to register products and export facilities still throttle trade. Exporters also commonly get caught up in political differences, as South Korean brands recently discovered. Regulations often favour local players. Take the cosmetics industry for example – foreign brands have to test on animals to sell in China, while local brands don’t. The all-present state media propaganda also regularly advantages domestic companies.
One of the more curious recent developments was last month’s announcement that China would be making it even harder to use a VPN to access websites outside the Great Firewall. China has its reasons for its Internet policies, but its timing around President Xi’s Davos address was interesting. As Jack Ma will profess, few things assist international trade more than unobstructed Internet access.
One category that is likely to see less trade is residential property investments overseas. New policies aimed at slowing China’s capital flight appear to be taking effect – in the short term at least – much to the relief of first home buyers in cities like Vancouver, Los Angeles, London, Sydney, Melbourne and Auckland.
Nevertheless, Chinese trade has come forward in leaps and bounds since opening up in 1979 and is generally moving in the right direction. Countless foreign brands from wagons to wine have enjoyed its benefits. With the number of Chinese earning more than $35,000 a year set to quadruple over the next decade, many more brands are likely to benefit too, particularly those who understand their target market and the tools available to reach them. Agencies like China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.