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UPS survey: China consumer power to exceed U.S. in 10 years

UPS survey: China consumer power to exceed U.S. in 10 years

A key segment of Asia’s business leaders believes the region’s economy will continue to enjoy strong growth in 2007, but many are more excited about the growth of India than they are China, according to a new survey by UPS.

   The survey of 1,200 leaders of small- and mid-sized businesses in Asia also found wide agreement that China will surpass the United States as the world’s largest consumer economy within 10 years or less.

   Only 5 percent of those surveyed said that China’s consumer market would never grow as large as that of the United States, while 57 percent said the two markets would reach parity within 10 years. Twenty percent of respondents said they expect the gap to close within five years.

   “These findings are significant because these small business leaders on the ground in many Asian economies say that China’s consumer market is growing faster than some leading researchers project,” said Alan Gershenhorn, president of UPS International, in a statement. “American businesses must understand that their future customers are just as likely to hail from Beijing as from Boston.”

   The business executives were interviewed for the UPS Asia Business Monitor, an annual survey designed to gauge the competitiveness of small- and mid-sized enterprises in Asia. About 1,200 SME decision-makers were interviewed in 12 different markets in the region. Survey respondents ranked China as the country with the greatest prospects for economic growth, followed by India and Hong Kong. But there was ambivalence about China’s growing economic power.

   Asia SME leaders seemed equally divided between those viewing China’s continued dominance as a boost (34 percent) and those who perceive it as both a boost and a threat (34 percent). Many also said they feel they are unable to compete with Chinese companies in terms of low labor and production costs (38 percent), and that there is a growing concern regarding increased price competition (25 percent).

   In contrast, SME leaders across Asia expressed a desire to capitalize on India’s rapid growth by leveraging its continued rise as a manufacturing base (30 percent) and outsourcing there (25 percent). In line with this growth, SME leaders also express a desire to become an outsourcing destination for India (20 percent), and an exporter of raw materials to India for manufacturing (19 percent).

   Eighty-five percent of respondents said that India is or has the potential to be a regional economic leader, and 81 percent said that India’s economy is certain to grow in 2007. Small business leaders in India were the most optimistic in the region, with 89 percent of respondents expecting greater economic prospects for their businesses in the year ahead.

   Small business leaders in India also were optimistic about their country’s trade growth, with 83 percent of leaders there saying they project U.S.-India trade to grow strongly this year — up significantly from last year’s survey.

   Although bullish on the region’s growth prospects, survey respondents also warned about threats to the region’s competitiveness, such as a lack of innovation, the availability of a qualified workforce and access to funding and working capital.

   The top three business concerns that keep small business leaders up at night in Asia are the quality of their services (50 percent), customer loyalty (48 percent) and the retention of quality employees (47 percent).

   Other highlights from the survey:

   * Small business leaders also said they expect intra-Asia trade growth to continue its upward climb, with 74 percent of respondents saying that regional trade will grow strongly in 2007.

   * Eighty-five percent of small business leaders in India say globalization has been a benefit to their businesses, whereas 55 percent of business leaders in Japan say it’s been a disadvantage.

   * Almost one-third of small business leaders (29 percent) outside of China said social inequality and environmental issues are worse in China now than one year ago.

   To view the survey in full, go to www.ups.com/abm.

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