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What’s your China strategy? Do you need one?
The new Silk Road is coming, reproducing the old trading route developed during the Han Dynasty (206BCE - 220CE) that linked China with India, central Asia, Europe and the Middle East and which dominated global trading for 1000 years. The new “Southern Silk Road” will link emerging economies of the global south not just by camel path, but by land, sea, air and communications technology in ways that generations alive today regard as new, but would not be that unfamiliar to a global trade watcher in 1066, the year of the Battle of Hastings.
How the path of trade used to look in the past – about 1000 years agoHSBC
“The Southern Silk Road is no more than a modern day incarnation of the original Silk Road, signalling the return of the world economy’s centre of gravity to its origins,” HSBC group’s chief economist Stephen King says.
Do all roads lead to China? Certainly, mainstream opinion is beating a path to China’s door. In Australia, the focus on this country’s role in the “Asian Century” and a government white paper on the topic due, for release mid-year, is raising the issue to prominence. In fact, it’s almost becoming uncool for businesses not to have a China strategy.
Europe and Asia – let alone Australian domestic markets – are soooooo old paradigm, the thinking goes. There is a sense that business today is not just about keeping up with the Joneses – it’s about keeping up with the Lis and selling to them.
But in China – like any market anywhere – the same basic rule applies. Do you have a product that works and do you have a comparative advantage? If not, don’t bother. Canny people know when something doesn’t work. BRW Rich Lister Peter Scanlon pulled out of Asian markets when they didn’t work for him.
“I’ve had a serious go and I can’t quite get there. I’ve put money into China, India, as well as Hungary and Poland. Ten years later if I’ve made my money back I’ve done well,” he told The Australian Financial Review earlier this year.
He also established a logistics business in India and sold it after saying he “couldn’t get anywhere”.
How Chinese exports are likely to grow in the next 40 yearsHSBC
Perhaps, being Australian, we’re not well equipped for the demands that a region like Asia makes of us. An aspect of the “tyranny of distance” that has defined this island continent with a small population is that it has been sheltered from many of the dynamic, and often brutal winds, of global commerce. Clinton Dines is an Australian veteran of Asia, having spent 33 years in the region. He puts it like this:
“One of the afflictions of distance, of isolation – of being an island continent market – really until the 1980s, early 1990s of the Hawke-Keating reforms, was that our business culture was very protected. Even after a lot of those reforms, because Australia is a small market and a long way away, it wasn’t worth the bother for a lot of international players to come and play in the market. So a lot of Australian companies haven’t been challenged in a truly competitive sense.”
It may be that a successful enterprise can stay that way by sticking to its knitting at home. If your comparative advantage is selling to customers in Melbourne’s Camberwell, Sydney’s Balmain, Perth’s Cottesloe, Adelaide’s Unley, Brisbane’s Taringa, Fannie Bay in Darwin, or Battery Point in Hobart, then keep doing it. The best path to success may be the one back home.