ASEAN Raiders: Insight into Abrasives Emerging Markets

In 2001, with the historic event of China’s accession to the WTO, the label “World Factory” officially hung on the neck of China’s international division of labor. In the course of nearly a decade, "MADEINCHINA" has penetrated the blood and bone marrow of the world economy, bringing us nearly 2,000 billion in ** reserves. However, due to the high price we paid and the constant changes in the factors of production, the label of the “world factory” has gradually become the “rough,” “pollution,” and “low-end” yoke. The “sweatshop” is frequently mentioned by people. , Labor-intensive and extensive economics in exchange for "low-cost" benefits glorious no longer, it has become a big upgrade for China's industrial structure!

From the point of view of trade, this is an inevitable result of China's development. China's annual economic growth of more than 8% will inevitably shift the factors of labor advantage, making it difficult for enterprises to find employment. This is particularly evident in coastal developed cities. At the Shenzhen Hardware Industry Chamber on January 15, 2010, the owner of the Aimei company Dai Wanmou proposed to the Chamber of Commerce that the cost of employing personnel in Shenzhen is getting higher and higher, and the most common workers’ food and accommodation costing 1800 yuan per month is difficult to recruit. To see if the situation rises to 2000, it won't be much better.

The continuous reduction in cost advantage gained from cheap labor is only a problem in foreign trade. In 2009, the world economy was still in the shadow of the financial crisis. As a major exporter of abrasive abrasive products in Europe and the United States, the situation has not been achieved. The great improvement was mainly manifested in the continuous increase in the unemployment rate and the fundamental weakness in spending power. Even if the state issued huge amounts of money to stimulate banks, real estate and other industries, the industrial contraction caused by the decline in consumption was also very significant.

From January to April 2009, artificial corundum was exported for a total of 30,000 tons, and silicon carbide exports were 27,000 tons, a year-on-year decrease of 80% to 90%. The operating rate of enterprises was only 10%, and 90% of the furnaces were in shutdown. In 2009, 1~ Exports in April amounted to US$12 million, which was equivalent to only one month of export in 2008, a decrease of about 70%. This situation has improved in the second half of 2009. According to the statistics released by the Customs, the abrasives industry has been growing for two consecutive months and a total of three months, with a large increase.

However, it is worth noting that the total export volume of China's machine tool industry decreased by 36.2% year-on-year. This shows that foreign industries are still struggling. Abrasive abrasives as industrial consumables are out of step with industrial development. Even if they turn for the better, they are not benign growth. The more important driving force is actually from national policies. In 2009, the country’s preferential policies for exports can be said to have reached the limit in recent years, but it is well-known that after the Copenhagen conference, the country will focus its economy on the green economy. Abrasives trade will rely on policies and benefits from European and American credits. The growth must also face greater setbacks.

To sum up, the future of foreign trade in the abrasives industry will continue to face three major difficulties. First, the weakening of internal advantages of products, such as labor costs, environmental protection, and weak technical characteristics, etc. Second, the shrinking industrial markets in Europe and the United States, and the improvement of the financial institutions' conditions will take a long time to promote industrial improvement, especially in terms of the unemployment rate; Unknown risks, such as national policies, trade protectionism, carbon tariffs, etc.

For more than a decade of development, foreign trade in the abrasives industry has been at a bottleneck, manifested in the inaccessibility of high-end markets in Europe and the United States, and brutal competition in the low-end market. With such an opportunity, China’s policy support for ASEAN trade has become a new highlight. Looking at Southeast Asian countries is a good way to open up new markets and avoid risks in the EU market.

Strategic Transfer of ASEAN Advantage

Among the 10 ASEAN countries, the economic development is not balanced. The countries with the highest per capita income in the world, such as Singapore, are also developed countries such as Brunei and Malaysia, and more developed countries such as Vietnam, Cambodia, Thailand, Laos, and Myanmar. In the case of the abrasives industry, the economic conditions of Vietnam, Laos, Cambodia, Burma, and Thailand are similar to those of China in the early 1990s. It is the prime time period for the rapid development of industrialization. Therefore, our eyes should be more focused. Above these developing countries in ASEAN.

In the product export competition between Vietnam, Laos, Cambodia, Myanmar and Thailand, we have obvious advantages. Guided by the theory of “life cycle”, markets in Vietnam and other countries are currently in the “formation” phase, while China is in the “growth” phase, while Europe and the United States are “mature” and “recession” and gradually exit the low-end market. Specific export advantages are reflected in three major areas.

One is the product cost advantage. In fact, the products of European countries and the United States have been separated from the actual situation of industrial consumption of ASEAN's underdeveloped countries. For example, Sweden's abrasive abrasive products have sold up to 200,000 tons per ton, which is unthinkable in the eyes of Vietnam and other countries. “Their taste requirements for the products are not that high.” Ding Dejun, chairman of the Henan Changcheng Abrasives Co., Ltd., told reporters of the Abrasives.

The second is geographical advantage. Vietnam is adjacent to Guangxi. The two places are only separated by a river. The logistics is very convenient. Yunnan is close to Laos and Cambodia. The two places originally had a good cooperation relationship due to strong tourism and implemented zero in ASEAN-China. After the tariff, it will certainly drive the development of the real industrial industry, and the abrasives as industrial "teeth" will also get rapid development.

The third is diplomatic advantage. The contradictions between the United States, Europe, and the ASEAN have been long-standing. The war between the United States and Vietnam in the Vietnam War period and the robbery of hot money represented by Soros over more than a decade ago have caused the ASEAN developing countries to feel painful and unforgettable. On the issue of foreign affairs, hegemonism in the United States and the predatory foreign policy of European countries have made ASEAN hostile to European and American countries. As far as the EU is concerned, there has been no substantial trade cooperation with Vietnam and Thailand. Therefore, no matter whether it is from the public's psychological level or from the government's policy support, China's consistent friendly policy will bring an advantageous business environment for the company.

In-depth understanding of ASEAN obstacles

The reporter interviewed some abrasive abrasive enterprises at random and found that entrepreneurs are generally not familiar with ASEAN.

According to Xu Dequan of Shenzhen Elastica Grinding Wheel Company, ASEAN developing countries, especially Vietnam and Laos, are still underdeveloped in the process of industrialization. Their products are mainly light industries, such as clothing and textiles. The abrasive abrasive industry as an industrial consumable, if there is no large number of industrial plants, then the market demand will not go up. At the same time, Xu Dequan also mentioned that with the free and open ASEAN trade zone, it is still necessary to conduct in-depth inspections. He mentioned the ASEAN Expo in particular, arguing that this is the best opportunity for enterprises to fully understand ASEAN's developing countries. He may also go to Guangxi this year to inspect the ASEAN market through the 2010 ASEAN Expo.

Ms. He from Guangzhou Jinsheng Hardware Trading Co., Ltd. said that although companies have been importing raw materials from Thailand, they have never considered exporting goods to them. After all, the consumption level there is relatively low, and it is totally impossible to compare with the EU countries.

It must be admitted that in the process of industrial development, countries such as Vietnam and Cambodia are still lagging behind, but we may wish to look at it from another perspective. Take Vietnam as an example. In 2007, Vietnam's industrial growth rate was 18%. It maintained a two-digit increase for 16 consecutive years. The annual industrial output value was 21.36 billion US dollars. This high growth did not slow down until 2008 due to the impact of the world financial crisis. However, in the first half of 2008, Vietnam’s industry maintained its momentum of rapid development, and in the economic recovery in 2009, Vietnam’s industrial recovery is even faster than China’s. This is due to the small impact on the overall output of its industrial economy. On the one hand, it also shows that the industrialization of Vietnam is an irresistible trend.

"Vietnam's market is certainly there, but at present companies do not know much about, should do more reporting!" Ding Dejun said to the "abrasive abrasive" reporter.

When we buy a stock, we don't want to buy the most expensive one, but we should buy the best potential for development.

According to statistics from China Customs, from January to November 2009, Vietnam-China trade volume was 18.4 billion U.S. dollars, up 2.9% year-on-year. Among them, Vietnam’s merchandise exports were US$4.2 billion, an increase of 5.1%; China’s merchandise exports were US$14.2 billion, up 2.3%; and China’s trade deficit with China was US$9.9 billion, an increase of 1.1%. The Commercial Counselor of Vietnamese Embassy in China, Ju Weifu, estimates that bilateral trade volume between Vietnam and China in 2010 is expected to reach 25 billion U.S. dollars.

The above data shows that the growth of the trade between the two countries is real. It is only due to the uncertain market conditions in Indonesia, Vietnam, Cambodia and other countries that have made people lack of interest. This phenomenon can indeed be attributed to the fact that the development of the ASEAN underdeveloped countries has yet to be improved. This can be seen only from the trade deficit.

The actual growth rate of GDP between China and ASEAN in 2009 increased by 0.004% and 0.157% respectively, China's exports increased by 2.042%, imports increased by 3.09%, ASEAN's exports increased by 3.312%, and imports increased by 5.927%. With the expansion of the market size, the investment flow to China and ASEAN will increase by 0.478% and 4.085%, respectively. Vietnamese ** reserves are not high, the country’s credit rating is also low, the local industry is still in its infancy, can not meet the needs of social development, more than 90% of the machinery and equipment need to rely on foreign imports. This industrialized market, which depends on external forces, is not complete, but full of development potential, is like a barbed delicious fresh fish. You have to know how to eat before you can taste it.

As an emerging market, companies must first understand in depth the ASEAN developing countries. In fact, the ASEAN Expo has been held for many years, but there are not many companies that are familiar with it. This is because the inherent concept makes the company more likely to look to the European and American markets. Even if it wants to strategically transfer ASEAN, it will focus more on Singapore, Malaysia, Brunei and other countries, but little is known about developing countries. With the formal establishment of the ASEAN Free Trade Area, the abrasives industry should re-examine markets such as Vietnam, Cambodia, Laos and Thailand.

Change style imagination tactics

The marketing strategy of abrasives companies in Europe and the United States is aimed at low prices. However, for the ASEAN market, companies can completely relax their original concepts, reshuffle their cards according to market conditions and their own competitive advantages, and obtain mainstream pricing rights. Even directly lead the market trend.

The first choice for expansion is investment! The average wage of workers in Vietnam is only 750 yuan per month***, while the Myanmar region has very rich mineral resources. For the abrasives industry, which has always depended on cheap labor and resource consumption, this is definitely the low end of investment. A good way to transfer the industrial chain. In particular, some powerful companies should seize this opportunity to get rid of the embarrassment of the extensive economy, imitate the developed countries in Europe and America, accelerate the upgrading of the industrial structure, and strive to compete in the high-end market in the industrial chain to obtain more rich profits and consume less. Resources. Culture will change with changes in different industries and countries. There is no direct experience to use, and it must be explored by the company itself.

The direct expression of the importance of culture for investment is first manifested in management. China's inherent "family" management model will amplify the contradictions brought about by cultural differences. There are numerous cases of failures in China's overseas expansion due to cultural issues. As a visionary entrepreneur, ASEAN trade should be implemented as a long-term strategy. The initial investment and even losses must be prepared. These are all cultural integration.

In addition to the cultural differences, industry associations and SMEs between China and ASEAN countries should also be connected as soon as possible and compare their respective strengths to analyze, which can maximize the benefits of their peers. The ultimate result of low-price competition and simple labor is likely to cause the protection of the free trade zone barriers one after another. Only by maximizing their respective advantages and forming a good atmosphere of cooperation can we achieve a win-win situation.

In terms of technology, since China's technology is not at the cutting edge of the industry, to a certain extent, it will use it as a bargaining chip to carry out positive and friendly cooperation, and in the long run it will gain even more substantial benefits. Some technologies unique to independent intellectual property rights should actively seek cooperation. It is first and foremost to develop a mature product. We should not be alone in technology innovation, make anyone untouchable, and finally rot in the stomach.

The once overlord trade policy in Europe and America tells us that if we want to cooperate long-term abroad and achieve a win-win situation, we cannot use an attitude that “it isn’t you are dead or me”, even if China has an advantage over ASEAN developing countries. However, there are also some concessions in some areas. It is believed that China-ASEAN can certainly find a win-win road for sustainable development and bring a new world to the abrasives industry.