By: Rafał Grabowski, Key Account Manager, ET2C Poland

                     In 2013, a great idea was created: connecting China to Europe by land and developing trasnsport routes that would be able to compete with sea and air routes. The Belt and Road Initiative (BRI, 一带一路in Chinese), as the project was branded, would become the largest infrastructural project in the  history of  the world.

                     The Belt and Road Initiative, also sometimes called ”new Silk Road”, represents a envisioned network of transport corridors that would link China with Europe. This means construction or upgrading of railway trade connections, especially between Europe and Asia, including high speed railways, roads, ports and airports, as well as the creation of the transmission infrastructure (oil pipelines, gas pipelines) and telecommunications. Currently, only 3.5% of Chinese exports goes to the European Union by road. Its main advantage is the cost substantially lower than air transport and significantly shorter time than its maritime alternative. To support the project, Chinese authorities have created New Silk Road Fund with an initial capital of USD 40 billion and is being realized on the basis of cooperation with partners from Europe and Asia.

                        Due to its size and location, Poland is seen by China as the most important country in central Europe. This is why a proposal to position Poland as a logistic center of Europe and fully utilize the BRI benefits was created in the IMF-supported project Poland 3.0, which is envisioned an infrastructural project which should help accelerate development of transportation routes and relevant infrastructure in central Europe. It is also the largest cross-border infrastructure project in Europe, implemented through clusters and to the combination of Polish rivers, motorways and railways in one plane of multimodal transport, the construction of a Transnational logistics center in Gorzyczkach, and the BRI with the planned, multimodal logistics center.

16+1 Initiative

                          Poland is not the only regional country included in the project. Fifteen more countries, under the the 16+1 Initiative by China, are planning at intensifying and expanding cooperation with the Asian giant in the fields of investments, transport, finance, science, education, and culture. This includes 11 EU member states and 5 EU candidates.

• Albania
• Bosnia and Herzegovina
• Bulgaria
• Croatia
• Czech Republic
• Estonia
• Hungary
• Latvia
• Lithuania
• FYR Macedonia
• Montenegro
• Poland
• Romania
• Serbia
• Slovakia
• Slovenia

                      In the framework of the initiative, China has defined three potential priority areas for economic cooperation: infrastructure, high technologies, and green technologies.

                      The first 16+1 Summit was held in Warsaw, Poland, in 2012. At the event, the Prime Minister of China announced a comprehensive initiative on cooperation with 16 Central and Eastern European countries, entitled China’s Twelve Measures for Promoting Friendly Cooperation with Central and Eastern European Countries, which is the framework document for the 16+1 format. This was followed by summits in Bucharest, Romania (2013), Belgrade, Serbia (2014), Suzhou, China (2015) and Riga, Latvia (2016).

The BRI and Western Businesses

                      The Belt & Road Initiative contains two key parts: a land-based “belt” from China to Europe, evoking old Silk Road trade paths and a “road” referring to ancient maritime routes. The initiative should span over 65 countries and the WPC experts estimate the infrastructural investment needs in the region to be valued at over USD 900 billion in the next 10 years. Western multinationals, spotting a bonanza, are selling billions of dollars of equipment, technology and services to Chinese firms building along it.

                      For example, the US-based General Electric (GE) made sales of USD 2.3 billion in equipment orders from the BRI projects in 2016, almost three times more than the previous year. John Rice, the firm’s vice-chair, expects the firm to enjoy double-digit growth in revenues along the BRI in coming years. Other firms, such as Caterpillar, Honeywell, and ABB, global engineering giants, DHL, a logistics company, Linde and BASF, two industrial gas and chemicals  manufacturers, and Maersk Group, a shipping firm, rattle off lists of BRI projects. Deutsche Bank has structured eight trade deals around it and has an agreement with the China Development Bank, one of China’s policy lenders, to fund several BRI schemes.

                      The important opportunities are not missed by any key players. Jean-Pascal Tricoire, the Hong Kong-based chief executive of Schneider Electric, a French energy-services firm, says that for his company Belt & Road Initiative is one of the most important plans of this century so far. Honeywell has recently formed a team called “East to Rest” that manages sales and marketing to mainland firms that are expanding abroad. As a goateed singer in Xinhua’s music video promises Chinese viewers, “when Belt and Road reaches Europe, Europe’s red wine is delivered to the doorstep half a month earlier”. For years to come, Belt & Road Initiative looks likely to be the toast of Western boardrooms, too.

By: Carolina Pocovi, Project Coordinator, ET2C Mexico

                        As a key player in the North American region, Mexico is a country that has significantly benefited from the US economic development. However, in order to reduce heavy trade dependency on its northern neighbor, rebuilding the country’s key sectors and applying structural reforms has become a priority for the government. Important changes include transformation of the energy sector, telecommunication, integration of workers from informal sectors into the formal economy and more accessible financial loans for consumers. Other government policies include reduction of import regulations and foreign trade barriers due to which the country’s leading economic experts forecast a significant increase in foreign trade volume. As a result, in spite of somewhat unfavorable global uncertainties, the World Bank expects Mexico’s economy to grow over two percent in 2017.

                        This is where business opportunities for Mexico and China lie. The two countries have been cooperating closely over the years, with China being Mexico’s second largest trade partner. However, restrictive trade policies of the new US administration have resulted in Mexico turning to the expansion of its trade with other countries and China is topping this partnership list. With the trade volume between the two countries being valued to over 71 billion dollars, the Chinese government is willing to provide all necessary support for building and launching special economic zones in Mexico. Closer trade and business cooperation can also result in other benefits, such as closer cultural and political ties.

                         Being praised by foreign investors for its favorable policies and attractive trade solutions is nothing new for Mexico. Mexico’s commercial reforms and deep economic transformation on one side, and a possibility of a formal free trade agreement with China on the other side represent a perfect solution for further development of business ties, aligning of common interests and gaining the best from each other.  For China, the benefits from a formalized trade agreement would be on export categories  such as metals, minerals, rubber, plastics, chemical products, leather as well as electro-mechanics and transportation equipment. As for Mexico, industries like the automotive (auto parts) and mining (copper, iron, steel and aluminium) could have an exponential growth and profit abundantly.

                         The upcoming period is probably the most optimal for further strengthening of the business cooperation between Mexico and China and, as expressed during the visit of China’s president Xi Jinping to Mexico, the two governments “can and should work together to offer more significant prosperity, development and opportunities on the basis of trade and cooperation”.

                          In the worst-case scenario, North American Free Trade Agreement (NAFTA) would see the US withdrawal and the effective annulment of what is now the North American free trade zone. However, if Mexico invests a significant effort in reduction of the US trade dependency and increases trade volume with other global partners, especially China, potential NAFTA annulment would cause significantly less harm to the Mexico’s economy. This represents opportunity for Chinese investors not only in the field of consumer goods trade, but also Mexico’s energy reserves. For the Asian dragon this would also represent another opportunity to increase its global footprint and business expansion, while Mexico would benefit from the foreign trade diversification and productivity optimization. It would definitely be a win-win for both countries.

By: Jonas Souza, Key Account Manager, ET2C Brazil

                   The economic supremacy of the West is a relatively recent phenomenon. When Marco Polo visited China in the late thirteenth century, he was visiting the richest nation in the world. China owned the most productive agricultural system of its time, its industries were creating the most advanced technological products, while the vast market of the nation generated an unprecedented degree of economic activity. According to Greg Clydesdale (“How business changed the world”), China was the world leader in terms of technology and quality of life in the pre-industrial era. The West has dominated the global economy for two and a half centuries, which represents very little time if the whole history of economic activity is taken into consideration.

                    Today, China is the most important trade partner for Brazil and it has been in that position since 2009, followed by the US. China is one of the key sources of foreign direct investment (FDI) in Brazil, leading with investments in energy, mining, steel and agribusiness sectors, followed by telecommunications, automobiles, machinery, banking and infrastructure development. However, it also needs to be said that there are also significant Brazilian investments in China, primarily in aeronautics, agribusiness, motor & auto parts, steel, pulp and paper, and banking services.

                    During the Brazil – China Business Summit in June this year, Chinese Ambassador to Brazil, Mr. Li Jinzhang said that the close bilateral partnership resulted in creation of the cooperation fund for classification of project development in Brazil – a common interest for both countries which should serve as positive reference for other Latin American countries in their bilateral relations with China. This shows not only China’s ambition to deepen trade partnerships with other Latin American countries, but also an opportunity for Brazil to strengthen its regional business leadership.

                    The decision of a company to import or export goods and services begins with an idea, will or need for business expansion, followed by the development of an international business development plan. Both countries have set their eyes on business expansion in overseas markets and their close cooperation will result in even more business opportunities for companies in both countries – they just need to figure out how to use them.

By: Mark Bradley, General Manager, ET2C India                                                                                                                      mark.b@et2cint.co.uk

                                   While India has made tremendous progress in some areas, the country is still considered to an underdeveloped society. This brings the risk of wrong expectations. Cultural diversity of India means that local languages and dialects dominate the daily business communication. This is why a language barrier can often prevent efficient communication with foreign partners and can lead to serious misunderstandings. Vendors are often local people close to the source of their product, meaning that they do not set up their businesses in urban, easily accessible areas. In spite of some improvement, Indian administration and tax hurdles remain very demanding and time-consuming, requiring employing full time staff specialized in these administration to ensure complete local regulatory compliance.

                                   This does not mean that India is not offering opportunities for international companies looking for sourcing partners. On the contrary: the country’s economic growth in 2016 was 7.7 percent, making it one the most significant ones in the world and signalling that India is preparing for a more important role in global trade. In order to advance the economy, the government under Prime Minister Narendra Modi plans significant investments in the national infrastructure, including ports and railways, including Chennai Port where shipment costs are already up to 7% lower than the regional competitors.

                                    Top sourcing products in India are textiles, leather, electronics and industrial goods, but this product range is expanding quickly to include other categories, especially the ones that are endemic to India such as spices and generic drugs. The relatively low labour cost allows vendors to manufacture high quality products that require a significant number of man hours at very competitive prices. Based on the volume of orders, these prices can be further reduced, further ensuring higher margins and stronger competitiveness.

                                     While sourcing opportunities for high quality items at the very reasonable cost are significant in India, an entrepreneur should always be aware of the existent regulatory, cultural and language issues. Selecting the right sourcing partner in India can be a challenge: we should always make sure that reliability, experience, dedication and presence in the local market are the key criteria. Remote sourcing management is not the solution for India and it creates significant costs and unexpected problems, often resulting in losses instead of profits. With the right sourcing partner that can ensure that costs are kept at a highly manageable level, India opens new global business opportunities that provide increased effectiveness and high margins for top quality products.

It is very clear that technology has established a crucial role in our lives. It now dictates and affects the way we work, communicate, exercise, eat, and, in essence, the way we live. Interestingly, we’re looking at how it’s affecting the way we shop and how retailers are reacting to these changes. As we welcome in 2016, we are taking a look at the latest emerging trends and what awaits us in this new year.

Shopping used to be a simple exercise, where consumers travelled to a point of purchase and bought the best available option within a given budget. End of story. Now with online consumerism increasing daily, consumers have access to endless amounts of information, allowing for immediate product comparison and review in just a few clicks.

As a result, the way in which consumers are shopping is continuously evolving. They’re not limiting themselves to a little research before making a purchase; they’re now comparing items in real time, from different vendors, while they shop. This puts a lot of pressure on brands to stay competitive with pricing, quality, variety, etc.

After purchase value: The purchase process does not end at the register anymore. Customers are eager to provide product feedback online. If they love something, they share this feedback globally. With equal vigor, they will advertise their comments for unsatisfactory products or services.

Therefore, the use and experience customers get from their purchases is becoming more and more important. By creating an added value around their stores and products, retailers are aiming to engage with their brand 24/7 and to make a difference that will reflect in their sales. Choosing to add this value or not will result in two behavioral outcomes: converting customers into brand adorers or prompting them try competitors’ offers.

How the “Shopping Evolution” Affects our Clients and our Service

Depending on how the supply chain responds to crises and opportunities, there are many areas in which the supply chain may help or damage retailers:

Time: Is your supply chain a well-oiled process that will help you react to an evolving demand? The reaction time to a crisis is getting shorter every day, and retailers can’t afford to delay responses to clients’ demands by one second.

Companies succeeding today have developed a strong supply chain that can provide a quick reaction time to the changing dynamics in the market.

Quality: Product quality has to be certified to the highest standards to build loyalty and grow your customer base. The customer now requires a good product, as well as to be assured that the manufacturing process behind that product complies with ethical working conditions, sustainable materials, and a quality level that measures up to their expectations.

Assurance and Peace of Mind: While retailers have made efforts towards making sure the shopping & product/service experience is most satisfactory, they need an ally that can take care of their supply chain, provide solutions, and avert problematic issues.

Flexibility: We have seen that ET2C’s costumers have become more conscious of the above factors when placing their orders, and we welcome this development. While companies used to plan their orders way ahead of time and change few details every year; now they are shortening their order times and content is varying month to month, we understand that having trendy inventory and selective products is a priority to our clients.

A Strong Ally that Deals with Suppliers
The previous points have translated to challenges for the factories, and that’s where we come in: We make sure that your inventory is delivered in the time and form requested, with no unwanted surprises.

ET2C brings the knowledge and experience necessary in working with factories, provides you the best results while adhering to your schedules, and all for the best price out there.

To kick off the New Year, here is our message to our customers, business partners, and potential new customers:

Proactive companies who analyze trends, forecast and take risks are the innovators and most likely come out on top of their competitors. On the other hand, reactive companies who play it safe and make moves after leaders have already paved the way — will most likely fall behind.

‘Change is constant, success is optional’ is more relevant than ever in 2016.