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West China: Why FDI Should Consider the Region

 


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Following the conclusion of our series of articles about investing in China’s western regions, I believe that foreign investors would do well to look at these emerging markets in China. As sales markets in the United States and Europe remain stagnant following the global recession and growth remains slow, China’s western regions offer a way out. For sure, they are emerging markets in their own right, and possess their own pricing and cultural sensitivities. Yet they also represent a huge potential market in terms of volumes.

The sale of products to West China will require a definitive strategy, and possibly even a local Chinese partner familiar with the local customs and purchasing habits. Yet assuming the venture makes financial sense – a costing exercise combined with market analysis – international firms bold enough may also find themselves doing rather well. A lack of competition here from foreign brands makes this a market very much ready for development.

The other aspect West China brings to the foreign investor is more intangible; but businesses that have had success here become more emboldened in their approach. Suddenly what seemed unlikely, or even impossible, becomes a normal part of business operations. For businesses to grow, they must take risks and set challenges for themselves. Successfully executing them grows management skills, develops new confidence and breaks down barriers. In the case of West China, in many circumstances, knocking on the door can lead the business into other, new markets, such as Central Asia, or Southeast Asia.

From Urumqi in Xinjiang, Dezan Shira & Associates has incorporated European companies involved in agriculture that had no market in Central Asia. Their initial plan was to export tomatoes back to Europe. Now, that business still sells back to their parent company, but sales of their products to Kazakhstan have made them a recognizable brand in the region. They are planning more products to capitalize on the opportunity. In certain areas, and this is especially true of emerging markets, you make your own luck. Just being in Xinjiang opened doors to markets they had not contemplated.

I’ve seen this story time after time in West China. In Yunnan and Guangxi, to the south, opportunities lie for the sale of products to the Southeast Asian markets and to ASEAN. With China having signed numerous tax treaties with ASEAN and its member states, a free trade zone has effectively been created that is resulting in very favorable tax conditions for China manufacturing and exports to the region. Exports from Southwest China can now easily be shipped to Southeast Asia.

To read the rest of this article by for China-Briefing.com.Chris is the founder of Dezan Shira & Associates, and has been doing for over 15 years.

Dezan Shira maintains , Beijing and 8 other cities around China.

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