The Italy-China Foundation has published a report on the prospects for trade between the two countries, simultaneously presenting the results of the second edition of the survey "Which China for Italian companies?" conducted on 180 Italian companies operating in the Asian country.
The report stems from the need to frame the main political and economic developments on which the People's Republic of China will be modeled in the next few years and, consequently, the measures that China's trading partners - primarily Italy - will have to implement to draw the maximum profit from a constantly developing and changing market. Through specific policies - including the XIV Five-Year Plan (2021-2025) and the formulation of the Dual Circulation Strategy - the Chinese government has launched a profound process of economic restructuring, placing at the center the thrust on internal consumption (which is estimated to weigh in 2040 for 44% of global consumption), the increase in quality, innovation and an ever deeper digitization of all aspects of society, to the detriment of the central role played by exports and by huge public debt investments.
In particular, China's domestic consumption is focusing on the sectors of intelligent industry, consumer goods, food and agricultural products, medical and automotive and services, creating a natural association with the key sectors of the Italian export.
The survey "Which China for Italian companies?" involved 180 companies (70.7% SMEs and 29.3% large companies), of which 17% with a turnover of over 200 million euros, essentially active in the machinery and mechanics sector, but also in the F&B sector and of the chemical-pharmaceutical sector. Almost 80% of the sample sees China increasingly as an outlet market, as well as a competitor in terms of innovation and product quality. The survey then highlights how the country is increasingly perceived as an essential piece in the strategies of companies both in the past and in the future, a perception also due to the confirmation in 84% of cases that they have had a positive experience in relation to their activities in China. The impact of some initiatives desired by the Chinese government is also confirmed positive, including the Belt and Road Initiative (BRI), positively evaluated in 44% of cases, with 53% of companies interested in being involved. The CIIE also turns out to be an increasingly popular initiative, with over 60% of the sample considering the event as a key point for promoting commercial relations between the two countries, with 43% of companies interested in taking part. in the future.
The document contains a series of recommendations for Italian companies and institutions operating in or with China:
1. Invest more in digital
The 2021 data indicate that the sample of companies has embraced the world of e-commerce ever faster. However, 51% of respondents do not use digital channels to sell their products, thus risking not being able to reach a wider spectrum of customers and not exploiting the potential of the increasingly digitalized Chinese market. Italian companies, therefore, must be aware that from now on digital will be the cornerstone of any strategy for the Chinese market.
2. Diversify your business strategy by including secondary cities
According to recent research from the McKinsey Global Institute, China will deliver $ 5 trillion in consumption growth over the next decade. China therefore represents one of the greatest development opportunities, since consumption in second, third and fourth tier cities continues to grow, largely driven by constant rural migration to lower tier cities and by return migration from coastal cities of first band. An investment strategy in China cannot be separated from a presence in lower-tier cities. In fact, if in the first and second tier cities the expenditure on consumer goods decreased by 1.5% and 1.1% respectively, on the contrary there was an important growth in the smaller cities, in particular in those of the fifth band, thanks also to the savings due to reduced or no mobility during the most acute phases of the pandemic.
3. Align its products with the new demands of Chinese consumers
Following the Covid-19 pandemic, Chinese consumers have become much more likely to reward companies that can produce a positive social impact. Companies will therefore have to develop commercial strategies also focused on ESG criteria before entering the Chinese market, in order to attract Chinese consumers thanks to a corporate message more in line with new expectations.
4. Focus on information and training
The companies will have to include in their entry strategies in China a series of services, aimed at training and informing their staff at all stages of their presence in China, in order to avoid incurring any errors of assessment and analysis of the socio-economic context in which work which - it is important to underline - is constantly changing. Consequently, the providers must register the request by the companies to receive support in the management of relations with China, offering consultancy services capable of equipping companies with all the tools in the legal, financial and intercultural training fields necessary for settle permanently in China.
5. Strategic partnerships with Chinese partners
As in 2020, faced with the choice to invest in the Chinese market, the interviewed sample prefers collaboration with local companies, followed by the possibility of cooperating with other national companies already present in China. The entry with other partners can facilitate the activity of companies, allowing to establish better relationships with consumers and to exploit already existing commercial channels.
6. Fostering system-wide models and strategies
Among the preferable measures to adapt to the qualitative growth of the Chinese economy and its production, we find the request to Italian and European institutions to invest more in innovation and in research and development. Italian companies - aware of the profound revolution underway from a technological, innovative and qualitative point of view of Chinese products and services - need more support from the Italian and European system which, based also on the findings of the survey, should assume a more autonomous strategic attitude focused on the needs of the EU. In this way, more effective competitive models and medium-long term bilateral relations could be planned.
