The future of UK trade with China

China may seem far away, but it is never far from the business headlines. As the world’s largest economy, both its domestic and foreign policy agendas have enormous importance for businesses across the world.

In recent years, much has been made of the potential for British businesses to export to China. The UK’s former Prime Minister and Chancellor made it their mission to foster stronger commercial ties. But amid growing trade tensions, what’s the reality for businesses looking to export?

Last week, Newable hosted Guy Dru Drury, the Head of the CBI’s China Office, to discuss this issue. The discussion took place just before the G20 Summit in Argentina – and as Guy pointed out, the signals for future US-China relations weren’t promising. Successive rounds of tariffs and retaliatory action between the two countries dominated front pages in the lead up.

But China is wary of sending the wrong message to the global audience. The country’s leadership is, as Guy suggested, running scared. It is a country trying to keep its options open in light of tensions with the world’s second largest economy and its slowing rate of domestic growth. Factor in weakening consumer spending and the funding squeeze for businesses, and China has every reason to be thinking seriously about creating new trade opportunities.

Opening up

Perhaps this is why President Xi Jinping announced that China intends to pursue “a new round of high-level opening-up”. Under the theme “New Era, Shared Future”, he has said China will create a platform to “deepen international business cooperation for shared prosperity and progress”, committing to “widen market access to the rest of the world.”

So what does this mean for British SMEs looking to export? Firstly, a reality check – moving into China is not about to become easy. The country may have jumped an extraordinary 30 places in the World Bank’s recent Ease of Doing Business Index, but it’s still complex and frustrating, and the professional services sector, for example, faces challenges it wouldn’t do elsewhere in the world.

But this is not to say that there aren’t positives. China is genuinely interested in building long-term relationships, taking steps to protect intellectual property, and generally seeing British businesses succeed. The talk of a ‘golden era’ with China might have some genuine substance to it.

To bring this to fruition, business must remember that individual relationships are more important than international relations between governments. A regional strategy is also vital. Exporters should not view China as a single market. In fact, it can be considered as a set of around 29 markets – each the size of some European countries.

Help at hand

Our fear is that UK companies will miss out on the reward. A recent study by HSBC found that 46 percent of companies around the world listed China as a top three future market. But in Britain, that figure was only 27 percent. This lost opportunity would be a real pity given support is on hand to help businesses to navigate the exporting maze – from the CBI itself, and from us at Newable.

Newable specialises in helping SMEs to start and scale up – providing access to finance, workspaces, and – crucially – export advice. Over the past few months, we’ve been talking to our own International Trade Advisers, and the businesses they’ve helped, gathering their thoughts on how SMEs can grow to be confident about exporting. The result – seven life lessons for business – are designed to help anyone looking to grow their business overseas.

One of these lessons – “Be the Best of British” – seems particularly applicable to China. As Guy noted at our CBI event, British brands have a distinct advantage in China, with strong associations of high quality, to the extent that our businesses are “top of the pile”. This is particularly the case as US brands could get caught up in the geopolitical tensions.

So if you are thinking about moving into China, we’d encourage you to be bold and to take the plunge. Don’t be put off by the complexity, and remember that individual relationships are more important than whatever noise might be circling the news agenda. Hands-on support is readily available too – feel free to get in touch at [email protected].