According to the Forum of Renowned Spanish Brands (FMRE) and ICEX Spain Export and Investment, the Asian country will continue to be an appetizing market, because it is the largest in the world in many sectors. This is the main motivation for 71% of the companies that operate there, despite the current high geopolitical uncertainty -indicated as a very important concern by 90% of the companies-, of the logistical restrictions derived from the zero COVID policy -which is defined as the main obstacle to their operations by 30% of the companies- and of access problems to the market, alluded to by 40% of them as the main barrier.
Above all this, Spanish companies are committed to maintaining and consolidating their presence in China due to the volume of turnover that this market brings them (48.8%), although with changes in their strategy.
The FMRE and ICEX Spain Export and Investment presented a report on ‘The Spanish company in China. Perspectives and challenges’, which provides information that helps companies decide on the most appropriate strategy for this Asian market in the current context, and which was presented this Tuesday at the ICEX auditorium.
Is it worth continuing to bet on China? Responding to this question has been the purpose of the study, which has been carried out based on the perception of the companies currently operating in this country, with a sample of 136 companies; the qualitative opinion of a series of experts on this market; and different analyzes of statistical and conjuncture data. It has also had the valuations of companies with a long history in this Asian market such as Gestamp, Meliá Hotels International, Indra, MONDRAGON Corporation, CaixaBank, Grupo Osborne and Grupo Simon.
During the presentation of the report, the director general of the FMRE, Pablo Lopez Gil has commented that “The aim was to develop an instrument that provides companies with some of the keys to the Chinese market today, in light of the new and complex context. We also wanted to know what the experience of our companies there is, and what they consider to be their greatest challenges in their future projection, in one of the most complicated historical moments. Without a doubt, it is a positive appreciation that they consider that the quality of the product, the brand and the Spanish origin are strengths that help them compete in this market of reference for an increasingly Asian world economy”.
For his part, Javier Serra, General Director of Institutional Cooperation and Coordination of ICEX Spain Export and Investment, explained that “The Chinese market is, due to its size, and also due to the lack of knowledge that still exists about it in our country, one of those that requires more objective and real information about the requirements to approach it with certain guarantees. Well, in this regard, this report is absolutely pioneering, to the extent that for the first time it offers an overview of the business of our companies in China, in which, in addition to having the vision of our office in Beijing, and from various experts in the Chinese market, the companies themselves are given a voice. Thus, they express their experience on the ground first-hand, through, on the one hand, specific cases, with names and surnames, and, on the other, a survey of a significant number of them.”
In general terms, practically for three quarters of the sample (74.3%), The health crisis has meant a reduction or a delay in their business or investment plans. Mobility restrictions have meant that essential personnel for business in China have not been able to travel there for 39.3% of the companies in the sample. Likewise, interruptions in the supply chain affected 19.6% of companies. How are companies adapting to the new situation resulting from the health, economic and war crises? More than half, 55.44%, state that they have reviewed their strategy in the Chinese market, mostly with small changes to adapt to current circumstances.
future projection
As for what Spanish companies consider to be the challenges for the futureregulatory changes they are pointed out by just over 21%, followed by the identification of opportunity sectors in this market 19.4%, and the evolution of relations with its international partners. 57.4% point to one of these three challenges as the most relevant in the coming years.
Spanish companies consider that the quality of its offer of goods and services is their greatest strength (33%), and their Spanish origin is also highlighted as a success factor by 68.4%. In addition, they do not consider size as an important factor to compete in this country, since less than 10% judge it as a limitation.
They also consider that the role of the public administration in its support to companies should be primarily to promote the Spain brand, something pointed out by more than 29%, as well as to identify business opportunities (22.8%), versus financial support which is only estimated as important by 13% of the sample.
As general conclusions drawn from the results of the survey and the qualitative opinion of experts and companies, the study highlights that all the companies analyzed qualify the process of entering the Chinese market as a positive experience that has helped them grow and all highlight the difficulty of the process, due to the presence of significant entry barriers related to cultural shock and regulatory complexity. Several allude to the need for a double penetration strategy based on the face-to-face and online channels and highlight the importance of having local partners and workers. On the other hand, they highlight the convenience of having alliances with other companies with experience in said market and also highlight the double interest of the presence in China, both for this market and for establishing a base of operations for other Asian markets.
The experts consulted for the preparation of this report point out that uncertainty is the main feeling generated by the Asian market due to the geopolitical context that leads to greater protectionism and the regionalization of production chains. In addition, the zero COVID policy is posing significant difficulties for Spanish companies, which have suffered from problems of mobility restrictions, which complicate aspects such as talent retention, and interruptions in the supply chain.
In recent years, Chinese local companies have gained market share to foreign multinationals. Therefore, companies that want to access this market must be more competitive than local ones and should do so through formulas such as commercial agreements and joint ventures.
However, China, with a growth projection of 4% for 2022 according to the IMF, continues to be a benchmark for Spanish companies, and penetrating this market is no longer just a strategic question of growth, but, in many cases, a requirement to maintain the current position and continue to exist in the future. The world economy is increasingly Asian and the new “silk road” presents new opportunities for the Europe-Asia relationship.
