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While mature economies sputter, businesses set their sights on developing markets, with China the primary target. But what exactly are the business opportunities in China?
First and foremost, look to the import or export of products. A primary driver of the Chinese economy has been its ability to manufacture goods cheaply. With wages under a dollar an hour, China can undercut many other international suppliers purely on the basis of cost. Vietnam, Malaysia and other countries are starting to penetrate low-end manufacturing while China moves to higher quality standards, better workplace conditions and increasing innovation.
Perhaps the biggest opportunities lie in export to China. China’s domestic consumerism is growing rapidly and well-off Chinese have developed an appetite for Western products, believing that many Chinese products are inferior.
Luxury goods are in particular demand. This isn’t surprising given China’s expanding wealthy class — the latest Forbes report on the wealthiest Chinese reveals that there are 128 Chinese billionaires.
Countries like France and Italy are working hard to develop Chinese interest in wine, beer, spirits and other beverages. And certainly the Chinese are keen to experience these new, sophisticated tastes.
So what about real estate? Only a few years ago it seemed that real estate investments, almost anywhere in the world, could do no wrong. I have personal experiences with friends who explored opportunities in China real estate only to be scared away by reports of declining prices and tricky regulations. It is said that many buildings on key land in major Chinese cities sit largely empty. So do you take the contrarian view believing now is the time to buy? It’s impossible to know the answer.
Franchise opportunities is another area to explore. Of course, KFC, Pizza Hut and McDonalds have found customers by the millions in China, but how do other brands fare? It seems hit and miss and highly unpredictable. I’ve heard lawyers discuss “sure things” that have fallen flat while being completely surprised but unexpected successes. It’s hard to understand or predict the behavior of this developing Chinese market.
Over the last decade China has spent billions of dollars on infrastructure projects, from bullet trains to improved highways. In fact, the just-launched Shanghai to Hangzhou line travels an amazing 400 kilometers an hour.
Recent areas of particular interest in China, based on headlines and buzz, include securing energy and mineral rights abroad, health care, engineering and IT.
Mark Sanchez worked in Shanghai and Beijing during 2009 and 2010 and is a member of Dragon Business Network, the leading source for China business opportunities and networking.