High Five

China’s fast-growing economy could soon be the world’s largest. Grab your piece of the action

You’d think the SARS epidemic would have ravaged China’s economy last year, but it seems the world’s most populous nation is both big and tough. Economic growth approached 10% in 2003, and it doesn’t look like China is ready to slow down. Chinese retail sales in January were up almost 11% from the year before, while industrial production through February had climbed by 23% year over year. All told, notes Stephen Poloz, senior vice-president and chief economist at Export Development Canada, China is presently responsible for more than a quarter of the world’s economic growth.Mao Tse-tung must be rolling in his grave: although China remains under Communist rule, its leaders have responded to capitalism’s clarion call. Since the late 1970s, when state-owned enterprises dominated Chinese industry, Beijing has relaxed the reins on business, even encouraging foreign investment and the creation of private businesses. Today, privately owned firms account for almost 75% of industrial output, and SMEs are a major force. Other state-driven, business-friendly initiatives are at work, including banking-sector reform and using the bond market to finance major infrastructure projects requiring an estimated US$60 billion a year.

But China is not an easy place to do business. Many of the challenges are obvious, including the linguistic, cultural and physical gulf that separates China and Canada. But Canadian companies should also factor dramatic regional differences, inconsistent enforcement of regulations and millions of bureaucrats into their export equation.

With the right attitude and enough resources, however, you can tap into China’s rising demand for foreign products. You’ll find the greatest rewards — and the highest risks — inland. For smoother sailing, consider Hong Kong and the increasingly entrepreneurial East Coast, which together attract 85% of foreign direct investment.

Another logical starting point is within China’s National Economic and Technological Development Zones. Some of these cities within cities harbor hundreds of companies — many of them foreign-owned — plus an array of government-financed infrastructure, from housing and schools to incubators for early-stage companies.

© 2004 Susanne Baillie