China is ushering in a new wave of foreign investment and experts say the country will overtake Japan as the world’s second largest economy, behind the US, within five years.
Leonard Shopper, a leading authority on facilitating business in China, believes it could become the world’s number one economy. Mr Shopper, 75, is the director of China Projects Development Inc (CPD), which helps foreign companies develop successful businesses in the Chinese market. It has been active there for almost four decades.
Mr Shopper says: “Having been part of China’s incredible growth these past 14 years — what can only be described as an economic miracle — I believe that China has only just started and the potential is enormous. It is still in its infancy regarding its commercial growth.”
China’s economy expanded 8.7 per cent in 2009, indicating that China achieved its growth target of eight per cent for last year.
It is perhaps unsurprising then that some of the world’s top business leaders are convinced by the investment opportunities in China. Anthony Bolton, president of Fidelity International Investments, deferred retirement to launch a Chinese fund; Stephen Schwarzman’s Blackstone Group, one of America’s largest hedge funds, has entered into a joint venture with the Shandong provincial government. US investor Warren Buffett, chairman of Berkshire Hathaway, bought 10 per cent of car manufacturer Build Your Dreams (BYD) and has been investing in several Chinese companies in recent months.
It is clear why foreign banks would want to tap into the Chinese economy. The country has 24 per cent of the world’s population and is now home to more millionaires than the UK (around 840,000). According to Mr Shopper, “only around five per cent of the population is affluent, meaning that there are still another approximately 1.2 billion people left to obtain ‘the Chinese dream’. When people think of China they think of Shanghai and Beijing, but there are more than 200 cities in China.
“It is the world’s ‘red basket’ for manufacturing. They make everything there.” What about the other BRIC countries [Brazil, Russia and India]? “China is several years ahead of India, which has made successful inroads into both the IT and textile/clothing sectors, but I doubt if they will ever catch up with the Chinese economy.”
And he says it is not too late to jump on the Chinese bandwagon. “There is still tremendous potential. The population will continue to increase and all the major brands are there now.”
CPD recently signed a multi-million pound deal with one of China’s leading e-commerce companies and Mr Shopper has since held meetings with a large retail chain which wants to go into China in a joint venture.
Mr Shopper established CPD six years ago following a stint working for the late billionaire businessman Shaul Eisenberg’s United Development Inc (UDI). He became involved with the group’s projects in China, and when the Eisenberg family closed down their operations several years ago, he set up CPD. It has offices in 15 of China’s main cities and boasts more than $1 billion a year import/export sales. Last month, he sold 75 per cent of the business and stepped down as the company’s chief executive but remains a director.
“Doing business in China is different to any other country and must be done the ‘Chinese way’. Many foreign people underestimate the Chinese people. They are a 3,000 year-old culture that can only be described as a civilisation.
“Starting a commercial enterprise in the Chinese market must be done with the permission of the Chinese government in Beijing or any of the 28 provincial governments throughout China. Most of the time they prefer that any foreign company enters into a joint venture with a recommended Chinese company. It’s paramount to be patient as a tremendous amount of red tape and bureaucracy exists.”
He advises firms contact one of the top UK law firms which have offices in China, such as Herbert Smith or Freshfields Bruckhaus Deringer, to make the necessary corporate arrangements.