GENEVA — China’s “high-value” goods market is projected to reach 1 trillion euros, or $1.3 trillion, by 2010, largely due to the expansion of the country’s middle class, a report by the European Union predicts.
The report concludes the expansion offers new opportunities for European companies eager to tap China’s growing middle class, which is expected to reach 150 million by 2010. However, the study argues that EU companies wanting to compete on price in the Chinese market will need to produce the goods in China itself “in order to be cost-competitive.”
The report adds that successful European companies “are already diversifying into China-based manufacturing where they want to compete in China.”
EU Trade Commissioner Peter Mandelson said, “China’s rise has exerted serious pressure on many European industries, especially in labor-intensive manufacturing. European companies must adjust as China is forcing us to compete harder, both for our own markets and for export markets. China is the major challenge for almost any exporting European business that still wants to be a business in 10 years’ time.”
Mandelson said many Europeans see China “as a globalization scare story.”
“But the economic evidence provided by this study…suggests China is actually a globalization success story for Europe: By forcing EU businesses to focus on their comparative advantages, they will move up the value chain and tap profitable new markets,” he said. “At the same time, competitively priced inputs from China are lowering costs for European processing.”
But European companies doing business with China also face major impediments from discriminatory regulations to poor protection of intellectual property rights.
Chinese nontariff barriers alone, the study notes, “cost EU operators no less than 21.4 billion euro [or $28 billion] a year in lost business opportunities.”