With all the concerns about Chinese GDP growth slowing as a percentage, it is often overlooked that due to the larger base, the “absolute growth” is greater now than five years ago! Hence many companies are right to be optimistic – in the long term.
Examples of further commitment are Lubrizol announcing the opening of a 400,000 square metre facility in Guangdong province, to better meet the demands of Chinese customers, and European companies such as Croda, which recently purchased Chinese additives producer Sichuan Sipo Chemical Co. Both are increasingly looking to the East for growth; mutual dependency is an increasingly important issue.
However, trade disputes could derail a lot of this progress. They are often messy, protracted and, at a time when the Eurozone is facing near-zero growth, unwelcome. After months of negotiations, the EU and China have resolved a damaging and painful trade dispute. The disagreement was first triggered after the EU levied anti-dumping duties on China’s solar panel exporters, but quickly spread into a tit-for-tat trade war which embroiled European wines, food stuffs and, briefly, Europe’s largest plane maker, Airbus.
China’s key economic planner, the National Development and Reform Commission (NDRC has even launched a probe into luxury car pricing. It is worth noting here that the three most popular luxury brands are all European: Mercedes, Audi and BMW.
US companies are no different, despite positive signs of growth at home. According to the Economist’s “Sinodependency Index”, the top 133 Fortune 500 companies depended on China for 11.2% of revenues in 2012, compared to 9.8% in 2009. From a lubes industry perspective, it is interesting that, although Caterpillar is included, these figures do not cover any oil companies.
To my knowledge, there is currently no comparable index tracking Chinese dependency on the West. As Europe and the US struggle for growth, Chinese trade officials must be asking themselves: “Does China need the West as much as the West needs China?” The answer must be “Yes”.
China is hoping to rebalance toward becoming a service economy within the next twenty years. To do so, it will need not only data and technology, but also insight into how to fully utilise them. This is something technically advanced companies in service-leveraged Western economies can, and should, deliver.
In the increasingly competitive lubes sector, battles for market share will be won or lost on the quality of insight producers can give their customers into their business. Jarn, a mid-sized Chinese producer of heavy truck oils, plans to deliver just that. By educating, training and supporting resellers nationwide, Jarn hopes to deliver insight and convince distributors to invest in better quality lubes.
The OATS China Bulletin is also adapting to meet the needs and interests of our readers. In line with recent changes to the OATS Global Bulletin, the five categories covered in our bulletin will be: Lubes Technical, Lubes Marketing, OEM Equipment, Internet Marketing and And Finally.
The new categories will address some of the toughest and most important challenges faced by lubes producers today, such as: how do I promote better quality lubes to Chinese consumers? How will new regulations affect my product? Where are the biggest opportunities for lubes growth in China?
As always, if you would like more information about how OATS insight can benefit your company, or would like to make a suggestion about the bulletin, please don’t hesitate to get in touch by contacting Diana Shen. We also invite you to share the OATS China Bulletin with your colleagues and contacts.
Sebastian Crawshaw
Chairman, OATS