China: more export opportunities than manufacturers think

China offers more export opportunities for food and drink manufacturers than they realise, according to global investment banking firm Goldman Sachs.

Jim O’Neill, chairman of the New York-based firm told delegates at the engineering employees body EEF’s conference earlier this week that China should be at the heart of every international business plan.

The Food and Drink Federation has previously said exports to China were vital in helping UK food and drink firms reverse falling margins.

And speaking at our sister title Food Manufacture’s Business Leaders’ Forum in January, Philip Wilkinson, a director with 2 Sisters Food Group, said a large number of firms  ̶  including 2 Sisters  ̶  Arla Foods and Müller  ̶  was exploring opportunities in China.

In the two years – from 2010 to 2012 – Chinese economic growth equalled the entire value of India’s economy, said O’Neill. He added that it created an economy that equalled the value of Greece every 12 weeks.

China’s economy valued at £5.4tn

China’s economy is now valued at about £5.4tn.

O’Neill said the world economy was likely to grow by 4% over the next decade, largely due to the growing importance of China.

He added that despite the current impression of global trauma, the world economy had actually grown by between 3.3 % and 3.5% over the past 30 years.

He identified throughout the past decade a major shift in global production to consumption ratios between the US and China.

“The US was consuming too much and producing too little, while China was producing too much and consuming too little,” he told delegates. “These two economies will become a little bit less like themselves and more like the other.”

He said this move was a result of the economic crisis of 2008.

O’Neill, who originally coined the phrase BRIC to describe the emerging markets of Brazil, Russia, India and China, said the other three countries were creating an economy the size of the UK every two years.

There is no doubt that they are having a “massive influence” on the world, he added.

He said the shift towards these emerging economies would be demonstrated by UK exports to these countries growing from 8% to 17% by the end of the decade.

‘Massive shift’

“This is still only half of what we export to Europe, but it shows a massive shift.”

O’Neill suggested the UK was becoming increasingly aware of the quality of growth in markets outside the EU.

Over the past decade, UK exports to the EU had fallen by 10% – from 55% to 45%, he said.

He estimated the UK economy could grow by 2% this decade.

When asked if he felt, given the increasing importance of the BRIC countries, whether or not the UK would be better off outside the EU, he said: “If Germany carries on [trading how it does] at the end of the decade they will be exporting as much to China as they do to France.

“If we knew this would happen when we set up the EU – we might have considered not being part of it.”

He added that if the EU works together it is worth being part of.

Siemens UK and North West Europe Cluster chief executive Roland Aurich said: “If the EU would act like a free-trade area then it is worth being a part of. We need certainty in the market – anything that adds uncertainty is not attractive.”