Is China a threat or an opportunity?

Is China a threat or an opportunity? For Jorge Mendoza Judan, Philippines’ commercial counselor and Department of Trade and Industry-China Team Leader, the question is irrelevant. The task at hand, he said, is “riding the dragon” so that Philippine entrepreneurs could take advantage of the China’s roaring success.

Speaking before graduates of the Asian Institute of Management yesterday, Judan said China is currently the fastest economy in the world, the fourth largest exporting nation, the world’s third largest importer, and currently the 7^th largest economy in the world. “China will be the second largest economy in the world by 2020, next only to those of the United States,” he said.

Philippine entrepreneurs, he said, should take advantage of China’s rapid growth by utilizing a two-pronged strategy of forming strategic partnerships or guanxi with Chinese entrepreneurs while capitalizing on specific niche markets, particularly electronics and semi-conductor; fruits like mango, bananas, pineapples (fresh, processed, and juices); coconut oil and coconut alcohol and its derivatives like coco coir and virgin coconut oil; ore and minerals including nickel, iron, copper; and e-services.

He said that success in doing business in China requires understanding the subtleties in Chinese business culture.

For instance, while Western-educated business persons are usually obsessed with “bringing home the bacon” after participating in a trade show, that approach doesn’t work in China. One has to establish guanxi with Chinese business people first by gaining their trust and confidence before any business deals could be made. That requires spending a lot of time socializing with Chinese entrepreneurs.

“Guanxi simply means relationships, the heart of almost all business transactions in China,” said Judan. “Formally, Guanxi is a relationship built on a practiced form of respect and obligation that adheres to Confucian hierarchical values where favors are given and received only when there is mutual benefit involved and in accordance to how people behave themselves.”

According to the National Statistics Office (NSO), the Philippine merchandize exports to China reached more than $4 billion dollars in 2005, representing a 53 percent rise over its 2004 figures. In the year 2000, China was not part of the country’s export markets; in the just five years, China has claimed the fourth spot, next only to the United States, Japan, and the Netherlands.

Currently, the country’s top exports to China include semiconductors, parts and accessories of machines, storage units, input or output units for automatic data processing machines, cathodes and sections of cathodes of refine copper, petroleum naphtha, electronic integrated circuits and microassembly, flat roll product of alloy steel, and fuel oils.

To be able to sell Philippine products to China, Philippine entrepreneurs—he explained—should focus on niche marketing, build-up brand and product image, develop internet presence, tie-up with existing foreign companies, and actively participate in trade shows.

Right now, the Judan says the DTI are also giving priority promoting fresh and processed fruits, marine or acquatic based products like tuna and carageenan, coconut by products including virgin coconut oil, coco-based alkyd resins and oleochemicals, abaca, natural rubber, and e-services including information technology services, and business process outsourcing.