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China - myth and market
In addition, however, Rommel, who has a degree in packaging engineering, has also developed a range of specific packaging systems for his European and US clients and mainly supports these clients himself. While ROXasia’s clientèle largely consists of western companies, most of the relevant manufacturers are Chinese.
• Mr. Rommel, several years ago the ‘Middle Kingdom’ was still seen as a gigantic country that was full of unknown surprises: a country full of people, mysteries and an unknown culture where only a small number of big players dared to develop any business at all. Today, however, the Chinese market is also being approached by small and medium-sized enterprises. What’s happened?
International competitive pressure is forcing everyone to think in entrepreneurial terms. For years now large parts of the consumer goods industry have been relocating their supply services to Asia and are now increasingly also moving their innovation services to that area. International procurement has become an economic necessity and is now being taken for granted. Yet more and more companies are currently moving to a system whereby they not only make their products and packaging in China, but they also sell them there.
• What are the reasons?
There’s simply a lot of demand: China’s growing national economy has been and still is delivering an enormous rise in the standard of living. Together with the growing impact of western consumer habits, this has created both opportunities and risks, especially for western branded companies. It’s because Chinese manufacturers have clearly expanded their product portfolios by now, so that they can distinguish themselves from western competitors.
A Chinese customer now has far more choice than in the past, while quality standards are almost as good. There has been a realisation in China that increasing demands – i.e. quality, flexibility and price pressure – have led to a need for radical changes to working infrastructures and to one’s own professional attitudes in matters of customer relations. Moreover, affluent consumers from Guangzhou to Beijing have formed their own specific target group in the premium segment – a group that is steadily growing, in need of attention and therefore causing dynamic developments in trade and marketing.
As more and more companies now have websites in English, the internet is providing prospective western firms with a far better preliminary overview via the internet than, say, five years ago. I would say ‘preliminary’ overview, because internet research at your own desk and in your own country can only give you a very superficial and fragmentary impression.
What is far more important for successful purchases is personal contacts and recommendations. We have therefore developed a multi-level model that has been very successful. In general, we can say: Every euro that is invested in careful preparation and meticulous research – in the relevant language and in the actual country – is a euro that need not be wasted on the subsequent removal of faults caused by simple gaps in communication. And even the most careful research cannot replace personal face-to-face contact with the individuals that are involved.
• Are you talking about the culture clash between China and the West which is mentioned so often?
A lot of clichés about the “Chinese character” are rather exaggerated. Quite often, in fact, it is certain German qualities that can cause irritation and resentment among Chinese business partners, for instance, missionary zeal, a know-all attitude, over-the-top quality claims and an obsession with cleanliness. On the other hand, you can achieve a lot more with patience and respect, both on the personal level and in business – especially when you consider that many areas – such as Chinese red tape – are simply impossible for Germans to understand. So it’s of great benefit to have some native ‘allies’ on your side. Also, a climate of mutual appreciation is of great benefit in the resolution of contractual subtleties, for instance when you need to agree on certain quality parameters and their controls.
• How would you rate the future development of earnings prospects?
The industry has experienced major growth in flexible packaging, with an amazing increase in daily consumption in the low-price segment in recent years. But there has also been considerable success in pharmaceutical packaging with its high quality requirements in terms of identifiability, sealing and safeguards against counterfeiting, and this will boost the corresponding demand for suitable high-quality packaging machinery. It particularly concerns printing machines, for instance for the label printing market. And the Chinese are especially fascinated by sophisticated finishing techniques and visual gimmicks, not just in the premium segment.
Another uphill trend can be observed in the food industry: the China Food and Packaging Machinery Industry Association sees enormous potential in the areas of convenience food, meat and drinks. The association reckons that the annual value of machinery in food processing and packaging was $17.6 billion in 2010. We can therefore see an attractive amount of cross-sectoral import business in mechanical engineering. As well as satisfying their general love for high-tech, the Chinese will benefit from suitable western technologies in their endeavours to ensure a sustainable resources management. In the medium-term, the Chinese are looking to move away from the profligate waste of valuable resources to an ecologically responsible economy – at least in theory.
• That sounds like a gold rush mood in the most populous country in the world.
As I said before, impressive growth figures can be misleading and may cause false expectations. We would always recommend setting aside any preconceived western views, taking time to look at things in person and listening while not losing sight of details. This will ensure fruitful collaboration with Chinese partners and will be of benefit to all those involved.
• Thank you, Mr. Rommel, for this interview.