Daniel Howlett, Regional Head of Commercial Banking at HSBC, Middle East, North Africa & Turkey (MENAT)
Doha: Neither the COVID-19 pandemic nor geopolitical tensions have dimmed China’s attraction as both a destination market and a key player in global supply chains. In fact, an overwhelming number of businesses say they will increase the proportion of their China-based supply chains.
Daniel Howlett (pictured), Regional Head of Commercial Banking at HSBC, Middle East, North Africa & Turkey (MENAT), said: “China is already the largest trading partner for the Middle East, North Africa and Turkey region, with annual two-way trade worth around $300bn.
As the world emerges from the COVID-19 pandemic, we only expect the scale of this trading corridor to grow at pace as companies from these two markets – which are home to some of the world’s most dynamic economies - look to build back better.”
These are some of the insights from HSBC’s Navigator: Growing with China report, a survey of 1,100 companies across 11 key markets across the world that is launched today at the China International Import Expo in Shanghai.
China’s pivotal role in global supply chains has proven durable. The survey shows that, contrary to some commentary or rhetoric, many companies are in fact increasing their exposure to the country. Some 75 percent of companies said they expect to increase their supply-chain footprint in China over the next two years.
Among the biggest reasons are increasing speed to market and China’s growing consumer demand.
Stuart Tait, Regional Head of Commercial Banking for Asia-Pacific at HSBC, said: “China remains a key supply chain hub for international corporates. While other markets have become more competitive in areas such as labour costs, they are yet to reproduce the sophisticated ecosystem that has developed in the mainland. Because China’s consumer market is growing by the minute, more international companies are adopting an in-China-for-China strategy whereby they produce goods for Chinese consumers.”
China’s “first in, first out” economic recovery from the Covid-19 pandemic is also fuelling optimism among companies across the world: Three-quarters (75 percent) of those surveyed expect sales in or exports to China to grow in the next two years, with businesses from Malaysia (88 percent), Mexico (86 percent) and Singapore (84 percent) feeling the most bullish.
More than three in four (76 percent) US companies say they expect sales in or exports to China to grow, on par with the global average despite geopolitical and trade tensions. Tellingly, nearly three in ten (29 percent) US companies expect growth of more than 20 percent, compared to the global average of 21percent.
Tait added: “Much of the optimism and ambition over the Chinese market is down to the mainland’s early recovery from the pandemic and its relatively strong demand compared to other markets. The country’s vast market and its unrivalled manufacturing infrastructure remain compelling reasons not just to maintain business with China, but in many cases to increase it.”
While global companies foresee a broad-based recovery across the Chinese economy, they are noticeably more optimistic about the outlook of service industries over the next 24 months.
