China slakes Mideast thirst for consumer goods
High quality, low prices makes country buyers' market of choice
By Habib Battah
Daily Star staff
HONG KONG: From cutting-edge hi-tech children's toys to eloquent home furnishings, China is fast quenching the Middle East's burning thirst for consumer goods. And, strolling through the majestic glass and steel corridors of the Hong Kong Convention and Exhibition hall, it's easy to see why.
A world-class public relations spectacle, the local trade council is spending big on the lavish first annual Summer Sourcing Show for Gifts Houseware and Toys, graciously welcoming each and every one of an expected 21,000 buyers and sellers from across the globe, including a number of Middle Easterners.
But aside from the cascade of free gifts and junket events, rock-bottom wholesale prices and the rising design quality of products speaks for itself. Trendy urban style back-packs for a little over $1; stylish canvas bags and suitcases for $7 a piece; a set of stainless steel pots: $13; metallic photo frames and oversized calculators: less than $0.60; and a pair of interactive toy robots for under $42. This list goes on and on, as do the predictions for China's much anticipated march toward economic supremacy, in the Middle East and beyond.
"It's unbelievable what's happened in the last three years," said Rajan Narayan, a purchaser for Dubai-based interiors retailer Home Center. "Things like ceramics and porcelain are comparable to what you find anywhere in Europe - and the prices are 50 percent lower."
With 45 percent of Chinese-made stock, Narayan said business is "buoyant" for Home Center, a subsidiary of regional retailer Landmark group, which operates 400 outlets across the Gulf and India. "All stores are reporting 30 percent growth," he said.
"Its very easy to work with people out of Hong Kong, they stick to the delivery schedules, and your paperwork is always fine. Places like India and the Philippines are way behind. They're terrible when it comes to delivery," he added.
By and large, Middle Eastern buyers expected dependence on Chinese goods to grow exponentially over the coming years, with business-savvy Hong Kong - which handles 25 percent of mainland trade - as the premier gateway to the growing power.
"The future is China," said Sami Mowaswes, on the hunt for packaging designs for Syrian chocolate maker Zenbarakji.
"The Chinese have recognized the need to improve on quality, while prices stay on the low side. That's the main factor that has helped the country penetrate foreign markets," he said.
But "Made in China" is still a turn-off to many regional consumers according the general manager of UAE-based United Furniture. Even though 70 percent of American furniture brands have factories in China, he says customers quickly lose interest and resort to intense bargaining when told the country of origin.
"If a customer tells me to reduce the price because its made in China, I tell him listen China made the atomic bomb," he quipped. No doubt, the country will need to invest heavily in marketing and public relations.
"China can rule the world much more if they improve upon their English. They have good products but they don't know how to explain them," he said.
Language is not the only factor keeping most foreign investors dependent on Hong Kong as a hub.
Serious doubts over quality control mechanisms and prompt delivery worry Toufik al-Daouk, managing director of Vertex Trading, a market leader in the Arab world's roughly $1 billion corporate-gifts industry.
"It's risky to order direct from China. If there is no Hong Kong supplier behind a factory, forget about it," said Daouk.
Hong Kong companies employ 11.7 million people on the mainland, operating 7,000 factories. Hong Kong exports to the Middle East grew 19 percent in 2003, with nearly 10 percent growth reported in the first five months of this year.
But, with global supremacy on the horizon, some entrepreneurs are willing to go straight to the source. Ashok Belani, co-owner of Saudi Arabia and Dubai based Al-Jumeirah Trading Company, opened a perfume-bottling factory on the mainland 18 months ago.
"China is Japan in the making," he said confidently. "But they have their eyes open, they are not going to make the same mistake."
That, he explained, would be pulling out of low end consumer goods - its core business that is bolstered by cheap labor - in order to hike up prices and quality to "skim the market."
"If they don't make this mistake, I definitely think China is the next superpower," he said. "It's going to take over everyone - they are very systematic in their approach."
Al-Jumeirah saw a turnover of $38 million last year, and is also involved in crystal manufacturing, and household, hotel and shipping supplies in addition to selling Arabic perfumes to airlines in Yemen and Saudi Arabia. Belani said most of his products come from China. He foresees Middle East consumption of Chinese goods rising rapidly over the next few years.
"We saw this trend happening three to four years ago," he said. "Setting up in China has helped us balance our portfolio, and spread out risks."
"It's definitely been a success," Belani added. "The Chinese are happy, we are happy, and business is booming. It's good stuff."
Copyright (c) 2004 The Daily Star
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