Although Spain entered the Chinese market late, making a concerted effort to penetrate it in the mid-80s when most major western countries were already solidly installed, its efforts have paid off with a large number of agreed contracts, especially since 1988, and with the fact that, although initially completely unknown to China, it has achieved a certain identity for itself, as an industrialised and relatively technologically advanced country.
Spanish commerce in China has had to contend with a series of obstacles: poor image and lack of knowledge about Spain and its potential, high levels of competition from other countries, and lack of knowledge about the Chinese market amongst the Spanish commercial sector.
Since 1985, a model for commercial action has been established, consisting of the coordination between businesses and government to overcome these obstacles. The Spanish government has supported its business efforts to enter the Chinese market through various means.
* financial support using FAD credits.
* institutionalised political support through various official high level government visits (from both sides) and the creation of various mixed committee and research groups investigating areas of economic cooperation.
* participation in trade fairs, organisation of direct missions etc. to promote the image of Spain in China.
With regards to the business sector, they have also invested a considerable amount of their resources in their own direct commercial activities, which have been slow, taking into account the initial obstacles, and which have required a long maturation period.
Nevertheless, since 1988 Spanish commercial efforts have begun to take off, with the agreement of numerous commercial export contracts for equipment and technology for both large projects (which play a key role in the promotion of Spain as a technologically advanced country) and medium sized or small projects in a variety of sectors such as machinery, agricultural products, leather and shoes, materials for plastics and materials for the production of construction materials. Furthermore, China has for some years been an important market for intermediate goods and primary products.
Since 1988 there has been sustained growth in Spanish exports, with an interruption this year (for which detailed statistics are still unavailable). However indications from the number of agreed contracts or contracts in progress show this to be a momentary phenomenon. Within this growth there has been a large increase in exports from the machinery and equipment sector to China, which represented 40 per cent of total exports in 1990 and 1991.
It must be said that Spanish investment in China has not been very high, but those investments that have been made, primarily in consumer goods, have normally had positive results.
Prospects for bilateral relations
Spain is no longer an unknown quantity in China and has demonstrated its potential with concrete results. Spain is able to provide a variety of products appropriate for the Chinese market. Currently, there exist a fair number of Spanish businesses operating in China, with offices based in both Beijing and Hong Kong, and a growing interest in potential investment from the financial sector.
As regards financing, the trend is now towards the increased use of non-concessional financing. This direction must be clearly explained to and accepted by Spanish businesses, which will have to make a concerted effort to develop their markets with financing from credits. The Spanish government could try to pressure the Chinese authorities but it is unlikely to achieve significant results, as economic reforms in China have meant greater independence for Chinese businessmen and thus greater autonomy in their decision making.
Nevertheless, we believe it is opportune to maintain the availability of concessional credits, dependent of course on budgetary restrictions, for two motives:
* to continue supporting the entry of Spanish businesses into China (although already greatly advanced over the last years, China's enormity means that the prospects and possibilities for promotion are still immense.)
* in order to compete adequately with other western countries, many of which also have concessionary financial programmes towards China.
One important fact to take into account is the increase in the Spanish trade deficit with China (in 1991, imports from China were worth US$1.139m creating a deficit of over US$800m). However, it is worth noting that Chinese figures suggest a very different picture, normally allocating the surplus to Spain (as most Chinese statistics do not include trade via Hong Kong and thus exclude the Chinese merchandise re-exported from the territories to Spain.) *
By the Comite para la cooperacon Empresaria: Espana-China (Committee for the business between Spain and China).
EC-China relationship from Spain's perspective
It is important to analyse the trade figures between the EC and China, and compare this with the Spanish experience, thus evaluating the relative contribution of Spain.
* The EC imports a total for US$17,700m worth of Chinese products. Spain receives US$1400m of this.
* China bought US$6600m worth of imports from the EC of which US$300m came From Spanish products.
* This means that Chinese imports make up 8 per cent of total EC imports, while Spanish exports to China only make up 4.5 per cent of total sales in China originating From the EC.
* The Sino-Spanish trade deficit makes up 10 per cent of the total EC trade deficit with China, while the Spanish GDP makes up about 8 per cent of the total EC figure.
Over the next few years, economic and commercial relations between China and the EC will be affected by a series of factors. The following have special relevance to Spain:
* the European Market, open since 1993, will enable Chinese products to circulate freely throughout the community, which will result in the increase of sales in Spain over a short period of time.
* the future free trade agreement between the USA, Canada and Mexico (NAFTA) will be a strong force for local production, particularly in Mexico in sectors such as textiles, shoes and chemicals. This will have repercussions for the equivalent Chinese imports in the USA, encouraging Chinese businesses to work even harder on penetrating the
These points emphasise clearly the urgency needed to intensify activity so that Spain can infiltrate the Chinese market further and at the same time balance its trade deficit with China, which could become insupportable for the EC.
We welcome the recent creation of the Centro de Negocios de China (Business Centre of China) in Barcelona, and see it as a further stepping stone within the cooperation of our two countries. *
By Jose Pedro Sebastian de Erice, general secretary of Tecnieas Reunidas Internacional.
Basic industrial products
The importation of basic industrial products and machinery equipment into Nina was the first market created by the Spanish and was initiated by Incoteco some 15 years ago. It is however the market least known to the general public as it rarely consists of large contracts or requires special credit systems and the general press does not tend to follow its successes and failures. The principle basic industrial products exported from Spain to China are:
* chemical products, petrochemicals, plastics, fibres, fertilizers.
* steel, with as much basic steel for construction as alloys, piping and other metals.
* paper and various packing materials.
* primary pharmaceutical products. .
This group of products represents between 90-95 per cent of Spanish exports to China up to 1989 which, thanks to the Spanish credit policy, accounted for the doubling of Spanish exports into China, although the basic industrial product market has continued to increase in spite of the general oscillations of this market and the fluctuations of the peseta to the dollar.
The reason for this steady growth stems from certain favourable factors:
* The Spanish sector complements Chinese demand and produces a surplus that can be absorbed by China. Many of these products are infact already produced in China, but given its immense size and its fast growing needs, China cannot satisfy its own demand and has to import the remaining deficit. Even taking into account the growing industry in China it is still likely that this deficit will continue and, in the case of some products, increase.
* The number of products in demand is increasing as China develops.
* Spanish basic industrial products are competitive in price and quality, illustrated by the very fact that Chinese businessmen buy these products. China is a large and often a major buyer throughout the world in many of the products mentioned, Chinese businessmen are thus expert judges of the international markets.
Although Spanish imports into China have increased and businesses have overcome the various obstacles in their way, the most radical changes are to come, in the long term with the proposed introduction of China into GATT. In the short term, external trade could be made easier by taking various measures, such as the reduction of present tariffs, the reduction or suppression of special quotas and licences on imports and also direct access to the importers of multifibres and the final users…to cite but a few.
This would increase Spanish-Chinese commercial interchange especially if the Spanish are able to keep up with the new opportunities arising from the changes in China. *
By Munoz Alvarez, director general of Incoteco.
The machine tool industry
Spain is the fifth most important machine tool producer in the EC and is ranked no.11 in the world. China has been the fastest growing market for the Spanish machine tool industry and is the fourth most important foreign market present for this sector. Donobat, Atera and Fagor have established offices in China; and three commercial missions have gone to China since 1978. Both sides _ have attended trade fairs and a number of Chinese delegations have visited Spain in order to look at factories and products. Good relations exist on both sides and at present a large number of contracts are under way, some worth more than US$60m. Spanish machine tools are being bought in China for a variety of sectors, automobiles, machine-equipment, mould manufacture, the naval industry, textiles, aeronautics, agricultural machinery etc. Licence agreements have also been given to Chinese factories for machines and equipment using Spanish technology. A solid base has been established in this sector allowing for the natural collaboration to continue and benefit both Spain and China. *
By Alberto Ortueta, director general of the Spanish Association of Machine Tool Producers.