Asia Business Insights 2017

The vote for the US president has disturbed the world’s political and economic order. The protectionist policies supported by the Trump administration puts a greater emphasis on Asia for German and European companies. China, as an example, has called for intensified economic cooperation and openness as a means to combat the increasing threat of American isolationism. Asian growth markets have continued to be attractive investment opportunities due to their high growth rate. This was the backdrop of the third Asia Business Insights conference, organized by Handelsblatt, on which top managers and mid-level business owners discussed their experience in the Asian growth markets, focusing primarily on China and India. globeone was there.

The day began with an outlook on the development of Asian economies from Stuart Gulliver, the CEO of HSBC. According to Mr. Gulliver, 2017 will be a record year for Chinese economic growth: Their strong middle class continues to have a greater level of disposable income, overcapacity within the markets is being addressed, and long overdue financial and economic reforms are beginning to be tackled. As a result of the USA pulling out of the Trans-Pacific Partnership Deal (TPP), new regional opportunities have emerged, such as through trade with neighboring states, to increase their export growth. This could be China’s way of resolving their export dependency on Western countries and their credit-driven growth model, added Frederic Neumann, who is the co-head of Asian Economic Research for HSBC.

In his opening presentation, Gulliver also reaffirmed what many others would emphasize in their presentations throughout the day: China is still a low-income country. Therefore companies need to continue to position themselves with an offer of quality and an acceptable price. With his findings, Mr. Gulliver confirmed what the consulting company, globeone, found in their biennial study for the last six years “Image of German Brands” – German brands continue to be very popular among Chinese consumers.

Subsequent to Mr. Gulliver, Mr. Hans van Bylen, the CEO of Henkel, discussed how a company can successfully position its brand in China. Henkel reacted initially too slowly to changes in the Chinese market, said van Bylen, however they were still able to reverse their course. They have since become the benchmark in the hair products industry and are the leading provider in the Chinese e-commerce market. There are three factors that determined their success: a reliable team with local market expertise who were able to react quickly to any unexpected upheavals; a consistent focus on customer satisfaction and product adaptations to localized preferences; and the digitalization of all sales channels and corporate communication. “Global control, local action,” is the new strategy for Henkel, stated van Bylen. However, headquarters first had to learn how to hand over responsibility to its employees who had specialized knowledge in the local markets.

The fact that the Chinese markets could not solely be tapped and understood from distant headquarters was picked up by two leading medium-sized companies from Germany, the mechanical engineering company Wirtgen and the bathroom product manufacturer Grohe. They both emphasized the indispensability of having a trustworthy, localized staff and the importance of product adaptation to the local market needs as the precursors to being able to provide high quality products in the Chinese market. Chinese consumers are normally prepared to pay a premium, as the reputation of local brands continues to suffer as a result of their involvement in a myriad of scandals. However, the premium cannot be excessive in comparison with the local Chinese brands. In order to find the proper balance, producers should have their own, simplified product models for the Chinese market in order to better react. The success of this strategy was also attested by the CFO of Bayer Limited in Greater China, Thomas Hoffmann: Through local acquisitions, Bayer was able to consistently provide products that matched local demand, he explained.

The downside to this success is not the pirating of Intellectual Property Rights, as would be expected; rather it is more the volatility of the Asian growth markets, which are associated with low levels of customer loyalty, that is the problem. Here lies the challenge for brand and corporate communications. The optimal customer communication requires sensibility and often professional expertise on site. What’s more in the case of China, the government is not only looking for investment from abroad, they are also providing an enormous amount of investment themselves. Technology and knowledge transfer is only a keyword that is continuously being discussed at the present time. Therefore, the embassies of both China and India emphasize how important it is that their countries continue to maintain stable economic relationships with one another. While the Indian ambassador described himself as a “fast track” for the expansion of German companies to India, the Chinese ambassador promised further opening of his country and intensified bilateral relations between China, Germany and the EU.

The former foreign minister, Joschka Fischer, rounded off the event: His outlook on the upcoming geopolitical transitions was underpinned by a fundamental pessimism regarding the Brexit and Trump’s inauguration. However, he also predicted an opportunity for the European Union to find a new common denominator. The German-Chinese and EU-Chinese relationships could become stronger as a result of this situation. Ultimately, the path forward will be decided by the upcoming elections in both France and Germany later this year. If, for example, Le Pen were to win, Europe would be on the brink and would likely face a severe domestic economic impact, according to Fischer.

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