Chinese Consumer: The world economy's next growth engine?

I think many people are relying on Chinese consumer to wake up and start consuming. The expectation is even higher because the American consumer appears to be still sleeping. There is even talk that the American consumer may not be the same for a very long time.

However, it appears that the state of non-chinese businesses in China is quite dismal.

The promise—and frequent disappointment—of doing business in China has been a common theme since at least the 19th century, when weavers in Manchester were said to dream of adding a few inches to every shirttail in China. Thanks to recession at home, foreign firms are keener than ever to capitalise on China’s growth. But Europe and America’s exports to China have remained broadly flat over the past year and amount to less than 7% of the total, even though shrinking exports to other countries flatter the figure. Even if the Chinese economy grows by the official target of 8% this year, the impact on Western firms’ total sales would be little more than a rounding error, says Ronald Schramm, a visiting professor at the Chinese European International Business School.

There are a number of businesses that are succeeding in China, but they face severe headwind.

[...there are] explicit legal impediments and hidden obstacles continue to hamper access to Chinese customers, despite China’s promises of reform when it joined the World Trade Organisation (WTO) in 2001. Publishing, telecommunications, oil exploration, marketing, pharmaceuticals, banking and insurance all remain either fiercely protected or off-limits to foreigners altogether. Corruption, protectionism and red tape hamper foreigners in all fields.

The foreign business lobbies "complain about subsidised competition, restricted access, conflicting regulations, a lack of protection for intellectual property and opaque and arbitrary bureaucracy."

It shouldn't be surprising to anyone that the Chinese government has their own interest at heart. Even America, probably the most pro-trade nation, is guilty of that. What I find interesting is that Chinese government hasn't been explicitly protectionist, for example, by placing tariffs-- but rather overtly by creating hurdles for foreign businesses to jump.

I am sure many will succeed, but the pace may be much slower than anticipated. And, more likely than not, the beneficiaries of the Chinese consumers will be Chinese firms! Good.

Complete Article is available here. Enjoy.