Has The Chinese Threat Affected You?

Foodstuffs, automotives, white goods, magazines, clothing, cosmetics and others… Everyone in the business community has their own fears about China and is talking about a flood of cheap goods. But the picture that emerges shows the dangers are different for each sector, even for each company. Some companies have ‘fears’, others ‘concerns’. Some are already experiencing the dangers. But there are also those who think that China will have a positive impact on their sector.

The board members of the Footwear Industrialists’ Association spent fully ten minutes discussing a shoe which had been placed on the table at one of their meetings. The issue which the board of directors was discussing was whether or not the shoe was made of leather. For a time, all of these businessmen who had spent so long in the business had difficult reaching a decision. Ali Murat Kızıltaş, the President of the Footwear Industrialists’ Associationö explains the reasons as follows:

“The shoes that are coming from China are made from synthetic materials. But they are so well made that no one can understood they are not leather without cutting them into pieces. At the moment, there is some severe unfair competition. This will be seen in some of the sub-segments in particular and many producers will go out of business. In any case, cheap products are continuing to enter the country. It is impossible for us to compete with synthetics.”

Shoemakers are not the only ones. Every sector from clothing to retailing, automotives and white goods is feeling the competition from China in a different way. But at the moment the impact is limited and it is not clear how it will develop or intensify. At the moment, every sector views the danger of ‘low prices’ in a different way. Even if there are some who are not very afraid, it is possible to see a general ‘concern’.

For example, as a retail company, Boyner is affected positively by China. Because in order to compete with China, companies across the world have to review productivity criteria and lower costs. These lower costs enable Boyner to offer better quality products at the same price.

But there are concerns in the automotive sector. Ümit Karaarslan, Assistant General Manager for Honda Turkey, says: “What will affect us from China is the fact that the Honda models which are manufactured in China within the framework of its global production policy can also be sold in Europe and Turkey.”

BSH CEO Nobert Klein says that flexibility, cost structure and logistics are very important when it comes to growth criteria. He notes that, in its network strategy, China is not a threat to BSH.

“It is impossible not to be affected”

After China became a member of the World Trade Organization in 2001, the automotive industry in China posted growth which caught the attention of the entire world. In 2004, the Chinese automotive industry grew by 14 percent and produced 5.07 million vehicles. This resulted in China becoming the fourth largest automobile manufacturer in the world after America, Japan and Germany. In 2005 the rate of growth in this field is expected to be 10-12 percent. As a result, in 2005 China is expected to produce 5.6 million vehicles and overtake Germany and become the third largest automobile manufacturer in the world.

How is China affecting companies and sectors?  
Company  Sector  Current impact Future expectations

ADEL KALEMCİLİK  Stationery  Does not believe that importing and selling Chinese goods is appropriate to its mission. But is importing a small volume of goods for competitive reasons.  Its product variety, and brand and financial strength, will enable it to preserve its position in the sector. Will use China to keep its costs under control.

BOYNER  Retailing  The global giants are having to reduce their costs in order to compete with China. This is having a positive impact on Boyner.  

Chinese products will continue to fuel the launch on the market of higher quality goods at a cheaper price. Boyner will pass these advantages onto the consumer.
BSH  White goods  As it has a global network strategy it does not see China as a threat. It is producing in China.  Will continue to be a global company which is active in many companies around the world. Will not be affected negatively by China in the future.

FORD OTOSAN  Automotives

Ford is also affected by the impact that China is having on the global automotive sector. All the major automotive companies have investments in China.  It is likely that there will be an increase in mergers between automotive manufacturers in China. These  mergers are expected to produce some very powerful international players.

HOBİ KOZMETİK  Personal care  

Chinese products are having a negative impact. But, as it is a domestic market brand, the ready-to-use products it offers on the market are not affected by China.  The sector will remain stable in the future.. Consumers are not expected to make purchases solely on price considerations.
HONDA TÜRKİYE  Automotives It exports within the limits of specific quotas. Postponed exports as a result of the problems experienced in the automotive sector in China in 2004.  May be affected by the sale in Europe and Turkey of Honda models manufactured in China within the framework of China’s global production policy.
INDEX GRUP  Information technology  Having an impact through its low cost advantage and dynamic structure. Chinese-made goods predominate on the desktop computer market.  Expects the structure of pressure from China to weaken. Believes that Chinese workers will not accept wages of $200 a month for much longer.
KOŞAR DERİ  Leather  Even if it had an adequate infrastructure, the Turkish technology sector would have problems competing with Chinese  goods because of its high production costs.  The fact that in terms of quality the Turkish leather sector ranks second worldwide after Italy raises hopes for the future. Plans to reduce costs through state assistance.  
MAVİ JEANS  Clothing  The fact that only 5 percent of products are imported from the Far East means that it is one of the brands with the least problems with quotas.    Is conducting work to raise productivity against the negative impacts that may arise from China or other sources in the future.
TEKOFAKS  Office products  The company is the Turkish representative for the products of Matsushita of Japan. Matsushita manufactures in China. It invests in products which are difficult to counterfeit  Will continue to compete with China through producing technology and innovations. Will invest in technology products which cannot be counterfeited.
TÜRK HENKEL  Chemicals  Products manufactured in China do not compete with those made by Henkel in China. China is an important source of raw materials for basic chemicals.  If China loses some of its price advantage then it will develop quality. This global development will also affect the Turkish market.

FADİME ÇOBAN
fcoban@capital.com.tr