On this last day of the first month of 2022 and the Eve of the Chinese New Year, I’d like to update you on China’s economy and share my thoughts on what this means for you and your business in the months ahead.
Economy & Growth
China’s GDP registered another year of impressive growth in 2021 with an annual growth rate of 8.1%. And for the first time, China’s GDP per capita surpassed the global GDP per capita average at US$12,000, a significant milestone for the country.
GDP Growth Rate (2020-2021)
Growth by industries
- Primary industry grew by 7.1%, while secondary industry grew by 8.2%. Tertiary industry also grew by 8.2% in 2021.
- Among the tech industries, the EV industry showed tremendous growth of 145.6%, while industrial robotics grew by 44.9%. Integrated circuits and micro computing equipment also saw significant growth.
- The services industry, including satellite and TV services, cash and fintech services, and capital market financial services, were all above 60% growth.
- Online consumption continued to be the engine of retail growth.
Growth by manufacturing value-added
- State-controlled industrial manufacturing saw its value-added grow by 8%, compared to 10.2% for private companies.
- Foreign invested manufacturing (including those Hong Kong-Macau-Taiwan-controlled) saw their industrial value-added grow by 8.9%.
Growth by Investment
- Fixed-asset investment saw the fastest growth in the manufacturing and high-tech areas. Specifically, high-tech manufacturing and high-tech services investment grew by 22.2% and 7.9%, respectively.
Outlook for 2022
We are expecting China to announce its 2022 economic growth target in March. In the meantime, the Chinese Academy of Sciences forecasts that China’s GDP will continue to grow by 5.5%. To reach that, China is likely to adopt more expansionary policies to support its economic growth this year. The focus will be the Three Horses of the Chinese Economy (consumption, investment, and net export).
Most sectors are set to benefit from the government’s substantial policy adjustments. More investment is expected to pour into “new infrastructure” – categorized by new energy and EV. There is also emphasis on the “social infrastructure” (e.g. education, healthcare, social insurance), and “system Infrastructure” (i.e. capital market development, tax reductions and IP protection).
In President Xi’s New Year speech, the word “stability” was the key watchword. Along with “common prosperity,” it will have wide implications on all aspects of the Chinese economy and society in 2022.
China needs to tackle some major ongoing challenges in 2022, such as the China-US conflict, significant pressure on the economy presented by the real estate industry, the demographic problem and inequality. For example, the goals of achieving common prosperity and long-term sustainable economic growth in China can only become a reality through revitalising the rural regions of China (which so far remain a remote scene for foreign businesses which are only slowly expanding into the lower tiered cities in China). The Chinese government may also look at reducing administrative interference in the private sector to further improve the “market mechanisms”.
On your marks
China introduced a new Foreign Investment Law in 2020 with fewer restrictions on sectors, more protection and enhanced regulator transparency, but the timing meant that not many new investors were able to take advantage of the favourable policy during the pandemic. The government appears to be keen to encourage more and new foreign investment to come into China this year.
If you believe China is the market where you want to have a presence, then you should consider taking advantage of 2022 to negotiate the best possible local government support. You can get the ball rolling without having to visit China by using support on the ground. For example, Crayfish has the local resources to help you get things done in Greater China right now. We managed to open offices for clients in Shenzhen, Hong Kong and Taiwan throughout Covid-hit 2020 and 2021.
I have heard that direct flights from the UK to China will resume in the near future, possibly after the Winter Olympics and the annual congressional sessions in March. We can also anticipate that the country will open its borders again for business travel at the same time. I’m certainly planning my next China trip already!
But visiting is only part of it. How can you kickstart or re-engage the Chinese market and grasp the window of opportunity more quickly than your competitors so you don’t miss out?
Here are some quick wins:
- Information: First, bring yourself up to date about what’s happening in China in your industry by reading published reports, or commission your own market research to get first-hand and reliable data to aid your decision making. What product lines have the best chance of success in the post Covid world? What are the implications and areas you need to adapt following the 2021 regulations blizzard? What are the potential opportunities for your business as a result of the Winter Olympics? Which companies appear to be the right partners who can open doors for you and get your sales going in China?
- Language: Do you know that most people in China do not speak English? To get your target customers to understand your business exactly, you need to properly localise (not just translate!) your marketing messages as well your communication channels. Perhaps it’s time to invest in a simple Chinese website that starts bringing you traffic directly from China? Whether you are in B2B or B2C, everything in China is digital nowadays – so educate yourself about WeChat, Weibo, Douying and Aiqiyi and other popular Chinese social media apps.
- Talent: Finally, people are what make or break a business in China. The first half of 2022 is a good time to search and snatch up the digital and tech talent you want for your Chinese business. There were considerable layoffs in a number of industries in China in late 2021 because of regulation clampdown, from education to social media and digital services, so there may be the right people available now to help your business. There may possibly be another wave of redundancies again just after the Chinese New Year, which could also ease the normally intensive recruitment pressure in the short term.
A Thousand Miles’ Journey
When I set out to develop Crayfish.io at the end of 2016, it was all about harnessing cutting edge platform technology to connect businesses with English-Chinese bilingual freelancing individuals, to provide services from translation and marketing to research and business development.
Over the past two years Crayfish’s business model has evolved, such that we have subsequently added some carefully selected niche agencies and boutique consultancies as our providers, for clients’ projects that require more manpower and teamwork. And we have made our digital platform even smarter by launching 78 off-the-shelf business services at extremely competitive rates, available 24/7 online, extending the geographic coverage to East and SE Asia in the meantime. For the more complex nature of work, Crayfish now offers troubleshooting, advisory and project management delivered by a high calibre team.
From my own (over two decades’) experience in doing business in the Far East, it is a dynamic process where all elements need to be in place at the right time. Most Western businesses find it hard to navigate such a process without help. I am very encouraged to see Crayfish is already working on a number of enquiries from the start of the New Year to help ensure that. Here are some examples from the UK:
- A vocational training college is looking for partners to develop its business in China
- A software company wants to gather market insights to better assess emerging opportunities
- A biotech SME is seeking help in crafting its business strategy in a new territory inside China
- An environment technology exporter is searching for a replacement for its inactive Chinese distributor
- A sensor manufacturer has come back to kick off the implementation of a new B2B digital marketing strategy which we helped to develop in 2020.
While these are typical steps in expanding internationally, the journey to China is likely to present more challenges due to regulatory uncertainties in various sectors.
A popular Chinese quote goes “the future is bright while the road is tortuous.” As the Year of the Tiger is upon us, I hope we all get the spirit of a tiger to become even more upbeat, fearless and focused. Happy Chinese New Year!
To get going, take advantage of some free useful tools and specialist insights available at Crayfish.io:
How can we use WeChat for Marketing in China?
A five-step guide to create a Chinese website for your business
How to do short video marketing in China?
How to protect your IP in China?
How to choose the right Chinese supplier?
How to mitigate currency and payment risks when trading with China