WOW it has been a busy year with little time for blogging. Business in Asia continues at a fast pace with the fast growing and the slow falling behind.
As I traveled this year, I observed that the countries with more young people (aka tax payers) and fewer white haired people are growing their economies far faster (countries like Saudi Arabia, Thailand, Malaysia, Columbia, and South Africa) than the established markets of North America, Europe, and Japan. The developed countries are going through a demographic shift with fewer tax payers supporting more baby boomers collecting their promised and well earned benefits. These are the trends that were predicted 20-30 years ago as the Baby Boomers reached retirement age. Technology has made the emerging markets the new growth markets. I predict that as Asia continues to grow, expectations of speed and service will increase dramatically.
Check out the attached International Herald Tribune article for some really interesting predictions of what the world will look like in 2030. China and Asia will continue to grow, but will have to contend with its own 'boomers'. The U.S. should do pretty well because technology should allow it to become more energy independent and because it has plenty of water. China will have the world's biggest GDP. The one positive issue the article fails to mention is the U.S. still has a positive birth rate (more tax payers) and can manage immigration to let in more young people to help pay for the aging population. Unfortunately Europe and Japan has no such policies in place and negative birth rates.
One of the most interesting and optimistic predictions from the IHT article is the growth of a global middle class.
On Saturday after my son's tennis lesson, we stopped in at the coffee shop at Clearwater Bay Country Club (a great club) for some refreshments. It was about 10 AM. Next to us was a table with ten people. Eight were Hong Kong Chinese, plus one Brit, and one man I would guess was Australian. They appeared to be a neighborhood group of some kind and not a group from the Club or from a company.
Their meeting was conducted completely in English. Each person spoke in turn with no one person monopolizing the conversion. Others listened politely while their colleagues talked. Rules of order were observed and the meeting had a definite beginning , middle, and end.
After the meeting I saw the British fellow in the parking lot as we were leaving the Club. I complemented him at how well the group he was with seemed to work together for a common cause. He said " yeah we are a neighborhood owners group from a village just down the road". I commented that whoever is chairng these meetings is going a great job. He responded " Mr. Yueng our charmain goes an amazing job especially considering the challenges we face are so complex".
To me watching that group captured the spirit that makes Hong Kong such a great place to live and do business. Hong Kong is a multi-cultural, can do, 'let's get on with it', kind of place!
Skype ia an amazing global business communications tool. I must admit, I was a late adopter and only started using Skype last year. It is a great free way to stay in contact with customers all over the world. The calls are pretty clear and when they are not, hey what do you expect for free?
My 11 year old daughter has an Apple computer supplied by her school in 5th grade (and paid for by her parents). She never calls friends on her cell phone or our land line, it is only Skype video calls for her and her friends. She even Google Chats (with video) with my wife at work!
I remember when we used to look at Star Trek and think about video communication as a thing of the future. If my 11 year old is any indication, that future is now! Better get a Skype name!
Just returned from the U.S. where many friends asked how the economy is in Asia. Well, it is pretty good. China reported 5.6% inflation in June earlier this week. They are fighting to get inflation under control. Second quarter GDP figures released today report China grew at 9.5% in Q-2. This is better than 9.4% as predicted by economists, but down from 9.7% GDP growth in the first quarter.
COUNTRY GDP GROWTH INFLATION RATE JOBLESS RATE
China 9.7% (Q-1) 5.5% 4.1%
Japan -3.5% 0.3% 4.5%
South Korea 4.2% 4.4% 3.3%
Japan is obviously devastated by the earthquake and tsunami. However, its supply chains have been restored and economists predict a better quarter to come. The other Asian tiger economies: Singapore, Taiwan, Malaysia, Hong Kong , Thailand are all growing from 4-7%.
China has the fastest growing car parc in the World. U.S. aftermarket companies are looking to international markets for future growth. China certainly should not be overlooked. AfterMarket Business World asked us to report on this amazing opportunity in their February issue.
Please click on the link below to read the full article.
Over 18 years I have visited hundreds of factories in China. These factories were making items for famous brands like Timberline, Mattel,Nike, Apple,HP, and retailers like Wal*Mart,Sears, and Target.
This week I visited several factories making automotive aftermarket products for famous US aftermarket companies. These factories were eager to make products for export to Europe, the Middle East, Latin America, and Asia, except China. When I asked about selling their products in China (because we have a Chinese company with a full business license), they said we would have to work with their ‘domestic sales department’. When we toured the production lines, we saw thousands of beautifully packaged products being produced for Citroen, Toyota , and Lexus to sold in China. What is happening in China is the car manufacturers and ‘4S’ (car dealer) groups are developing their own products and aftermarket supply chain for accessory items. This will make it much more difficult for latecomers to get their business established in the booming Chinese auto aftermarket.
This also signals the dramatic change that occurred during the recent economic crisis when export orders fell and the Chinese government stimulated the economy, hundreds of Chinese factories hired sales teams and worked hard to develop their domestic business. We saw the fruits of their hard work and success as we watched thousands of aftermarket products destined for domestic Chinese consumption roll off the production lines. In fact on that particular day I do not think we saw any products destined for the US or Europe, what a change!
The US Commercial Service and the Hong Kong Trade Development Council initiated a trade pact to recognize Hong Kong as a trade hub. Hong Kong is an amazing China trade center.
As a US citizen who has worked with many U.S. companies growing their international business, it is gratifying to see the Commercial Service and the HKTDC working together. Both are excellent organizations and trade proponents! Any US company looking to go global should consult them.
President Obama just returned from Seoul and seemed bewildered by the negative reaction the FED's policy received outside the U.S. especially in Asia.
It is quite simple: during the economic tsunami, much of the dollars, euros, and yen pumped into the developed economies to stimulate the banks wound up in Hong Kong, China, Singapore and the rest of Asia. Why because the returns were better and Asia was deemed 'safer'.
It is crazy that the banks in the US are afraid to lend because of the economic outlook, yet somehow Asia looked to be a bargain. In Hong Kong, for example, our stock market rose a combined 21% in September and October alone, and real estate is now 20% higher than before the economic tsunami. Some experts predict another 20-30% rise in the price of luxury flats next year! Looks to me like the same behavior we saw in the U.S. before the Tsunami.
Check out this article from today's Hong Kong Standard about the plans of Hong Kong's Financial Secretary to combat more 'hot money' inflows from QE2:
I think the average American or European would be very upset to know that much of the currency printed and deficits created by their monetary authorities has left their shores to finance debt and mortgages in Asia!
Asian leaders are literally saying: 'we are awash in liquidity. No more please'.
Today I had lunch with two Americans who both own successful businesses in China. Although both gentlemen had very different personalities, they shared one common trait: they were flexible.
Business in China is a lot like sailing into uncharted waters. When Plan A does not work, one must be creative and come up with Plan B and give it a try.
Check out the attached article from today's International Herald Tribune about a guy from the Bronx who went to Beijing to teach English and wound up running the school after the owners vanished. Chick the link to view the article View this photo
MEMA (Motor Equipment Manufacturer's Association) the major US auto-after market suppliers association had a great article in it's newsletter yesterday. If you are a US based company looking to go global, this is definitely worth your time to read and perhaps to circulate to your management team.
We just set up a wholly owned company in China with a full business license to trade and invoice distributors . There were no real barriers, it was easy. I can tell from experience working in both countries/cultures: as Americans we have to see the whole world as our market and get faster . The Chinese suppliers are aggressive, fast, and easy to deal with. I can tell you after 18 years selling U.S. products to international markets that there are really no external barriers limiting your success. Like anything else: it is all about people: get the right people and it will be easy.
This article zeros in on the very reason for this blog: 95% of the world's consumers live outside the US.
Exporting Not About Shipping Jobs Overseas, Conference Speakers Say
Anyone expecting to hear happy stories about recycling and energy-saving light bulbs at the Trade and Green day of a major exporting conference in Detroit Monday must have been disappointed.
What they heard instead was speaker after speaker urgently hammering one point: Grow sustainable manufacturing exports or get used to an ever-dwindling economy.
“It’s not just something that’s nice to think about,” Fred Keller, CEO of Grand Rapids-based Cascade Engineering Inc., said of growing sustainable exports. “It’s something that’s essential, something as a country we absolutely must do.”
Keller and ArvinMeritor Inc. Chairman and CEO Chip McClure said the U.S. is losing its edge in high-tech products to China.
“I’ve seen firsthand this country’s leadership role in manufacturing g! o on a long, slow downhill slide,” McClure said. “Somewhere along the way ‘manufacturing’ became a dirty word among those who set the policies for our state and our country...
“There’s only one dirty word and that’s ‘inaction.’”
They spoke at the 2010 International District Export Council Conference in downtown Detroit. The event was sponsored by the Department of Commerce, which is playing a central role in meeting President Barack Obama’s goal, announced in this year’s State of the Union address, to double exports in five years.
Other speakers included Commerce officials, researchers from the Brookings Institution and Wal-Mart’s director of sustainability, Miranda Ballentine.
Government officials throughout the conference pointed out that 95 percent of the world’s consumers are not in the U.S., and only 1 percent of U.S. companies export. Of those, 58 percent export to only one country, typically Mexico or Canada, sa! id Secretary of Commerce Gary Locke on Tuesday.
“Imag! ine if w e could just get those 58 percent of U.S. companies that now export to only one country to export to an additional country, Locke said. “You do that enough times and America will not just meet but beat the goals set out by the president.”
Exports have increased 18 percent this year and accounted for more than half of U.S. gross domestic product growth in the past four quarters, he said.
Monday’s keynote speaker was Stephanie Burns, chairman and CEO of Dow Corning Corp. in Midland.
“We need to do this now,” she said of getting the right mix of policies, incentives and subsidies to encourage development of solar energy products.
Dow Corning is the majority owner of Hemlock Semiconductor L.L.C., a subsidiary of Down Corning that is based in Hemlock, in Saginaw County, and makes polycrystalline silicon.
The material is an important ingredient in solar cells, and Hemlock is the largest manufacturer in the world, Burns said. She has glo! bal customers in the solar industry who “consider the U.S. an emerging market for renewable energy.”
Many statistics were offered that reflect the threat the United States faces. Exports represent 12 percent of U.S. GDP, whereas in Germany they represent 42 percent, said Ro Khanna, deputy assistant secretary for domestic operations at the U.S. Commercial Service.
The U.S. trade imbalance works out to $140 for every person in the country, Burns said. She also said 12 years ago the U.S. had 45 percent of the global share in solar panel manufacturing, and now it’s down 7.
A brighter statistic offered by Secretary Locke was that jobs associated with exports in general pay 15 percent more than the typical wage in America.
The country and Michigan need to get down to making the sorts of products needed to stay at the global economic forefront, speakers said. Those products will be sustainable, green products that are becoming increasingly in dema! nd and will be an export boon to the nations that get the jump! on them , they said.
“We cannot grow our way out of this economy by asking the American consumer to consume more,” Cascade’s Burns said.
Cascade’s Keller said a renewed emphasis on manufacturing is the way to deal with unemployment.
"Manufacturing can and should lead us out of this," Keller said. “Doubling our exports is pretty dramatic, and supporting the manufacturing base is a way to do that.”
His company has increased exports 26 percent, and they now make up 19 percent of total sales.
"By focusing on sustainability, we’ve expanded our product line and increased our sales,” he said.
The examples given of the types of products the country needs to produce reflected the companies represented. Keller said his company is further developing its small, lightweight wind turbines that can be put on home rooftops. Expected to come out in six to nine months are turbines that can be adjusted to increase energy output.
ArvinMer! itor is developing technologies that allow semi-trucks to use less fuel. A hybrid semi-truck is under development, and Wal-Mart is testing one in its fleet.
Speakers uniformly called for more public-private collaboration, promoting research into renewable energy and other forms of sustainability, changing regulations and taxes to encourage sustainable manufacturing, and developing a workforce suited to green manufacturing.
"We need help from the government to level the playing field," McClure said. He said more effort is needed on trade barriers in other countries, currency manipulation, and the regulatory and tax environment in the U.S. He also said education is a factor.
“Can a nation of MBAs trump the need for engineering Ph.D.s?” McClure asked.
Dow Corning’s Burns said her company usually sells its materials to customers abroad, which then make solar modules and sell them back to customers in the U.S.
Incentives for consumers to ! buy solar products are necessary for building a solar industry! , she sa id. That’s because manufacturers of solar panels and solar-related products want to cluster with suppliers in regions that have incentives in place so they have immediate access to customers, she said.
"We’re talking about game-changing incentives for citizens" Burns said. "This is what’s differentiating a manufacturer’s choice in deciding where (to locate)."
McClure also called for supporting free trade agreements.
“Free trade gets a bad rap. It’s a misperception, and it’s a big one,” he said.
He suggested they be called "export promotion agreements" to give people a different, more pointed, idea of what the deals do.
Secretary Locke said the Obama administration is working to finalize pending FTAs with South Korea, Panama and Colombia. Obama wants to have a deal settled with Korea before heading to a G20 meeting there next month.
Locke also said the Obama administration wants to make a federal tax credit for researc! h and development permanent, something that several speakers called for the day before.
“The president very much supports making permanent and expanding and making more generous the R&D tax credit,” Locke said in an interview at the Detroit Regional Chamber.
Kristine Gough, purchasing manager at Full Spectrum Solutions in Jackson, said she was encouraged by hearing that the federal government and business leaders see exports as vital to growth. Her company makes energy-saving lights for outdoor and institutional use. Full Spectrum has grown in recent years and is looking to begin exporting.
“What they say needs to happen, we can do,” Gough said. “That’s what we’re ready to do.”
Thomas Gross, president of Dynamic Manufacturing in Weidman, northwest of Mt. Pleasant, runs a company that makes wood chippers. Were it not for an effort to go after exports beginning in 2007, his company of 40 employees probably wouldn’t be around t! oday. He said 70 percent of his sales are now in exports.
Dynam ic Manufacturing had $10 million in sales in 2009, he said.
“Anybody who tells me that exporting is about shipping jobs overseas is absolutely wrong,” Gross said.
The HKTDC wrote about Posh Pile in the October 27 edition of HK Trader. click here to see Facebook, You Tube, and our website have really turbocharged this amazing car mat business we have built!
If you told me 10 years ago that the web would advance so quickly that we would we be six months and nine months respectively into the business before we created a print ad or printed a catalog, I would not have believed it!
And the online activity in China is even hotter! We have learned in the last two businesses that the views you get for videos on Youku and TuDou in China equal or surpass the views you get on You Tube from the entire rest of the world!