“We must avoid anything that is short-term or temporary, business in China is usually done in the long term”

Interview with Guillermo Díaz, head of the Shanghai Representative Office of Banco Sabadell

We turn our gaze to China, which has overcome the covid-19 pandemic. We want to know what the situation of the Asian giant is like in this post-covid scenario, and to do so we have invited Guillermo Diaz Sevilla, head of the Shanghai Representative office of Banco Sabadell.

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We would like you to tell us how the situation is in China at the moment Guillermo Díaz: “The pandemic began in the province of Hubei and the city of Wuhan; Most of the cases have been concentrated there. In Shanghai there were not even a thousand cases. Today the situation is quite encouraging because the measures have caused the number of cases to go down; and the cases we have are cases of Chinese nationals who are returning.”

Has all activity been reactivated?

GD: “Economic activity, both industrial and commercial, has been reactivated to something close to 100%, today the only thing that really remains closed are certain events that attract large crowds or cinemas. 

In the manufacturing fabric, it has returned to normal before the outbreak; I imagine that depending on the sectors, there are sectors in which this activity occurs again without any type of limit and others that, due to the absence of external demand, are a little slower.”

How is China expected to emerge from this crisis? (GDP growth prospects in 2020 and 2021)

GD: “To date there is no official figure. It is true that the incidence of covid-19 in the Chinese economy produced a drop of close to 7% in the first quarter. This indicated that annual growth was going to be quite impacted; However, international analysts have placed this impact to a much lesser extent. If we take the IMF data we would be talking about a drop in economic growth of around 1% or a little more, and certain international banks place it at 3%. And for next year the forecasts also vary greatly: international banks and analysts place growth at 5% and the IMF is much more optimistic and places China's growth in 2021 at around 9%. 

For the first time in China's recent history, the government has not wanted to set objectives. It is a very realistic measure since the Chinese economy, which depends heavily on exports, is subject to international markets, and before setting any type of growth objective for this year it is better to see how international markets and the economy will react. demand".

Seeing that China is the first country that has already overcome the pandemic, have you noticed an increase in interest from Spanish companies in that market in recent weeks? 

GD: “China is a country that in the last 15, 20 years has aroused enormous interest for all types of Spanish companies and in all types of sectors, and that interest continues. 

It is true that during the outbreak we have noticed that interest in sanitary items or hospital equipment has increased, Spanish companies are very interested in acquiring these types of products, since China quickly alleviated any type of shortage or need.

For those companies that are thinking about starting to export their products to China or establishing themselves in the country, what are the advice that you have always given that they should continue to take into account and what are the new recommendations to face the new situation?  

GD: “I have been linked to China for the last 26 years, first because I was in an office in Honk Kong from 94 to 2005 and from 2005 to today in Shanghai, and I have seen how Spanish interest has been growing.

Advice? I would tell you that the most valid ones are the advice aimed at knowing what the modus operandi is like, how China is changing the mentality of companies and also how it is changing the rest of the world.

What we continue to tell companies here in China is that they come with their homework done, that they have a good study of the company, the sector, with which they are going to come into contact, that they tend to know them personally and their facilities, so they will both have to travel to China; that they tend to invite them to Spain so that this knowledge is mutual, and from my point of view one of the success factors of commercial relations is the long term. We must avoid anything that is short-term or temporary, business in China is usually done in the long term, with knowledge of the people we are in contact with and the sectors, and taking into account that there are a multitude of companies and there are "We have to diversify as much as possible." 

Are you aware that new protocols have been introduced that affect trade relations between China and other countries such as Spain? 

GD: “Yes, they have introduced measures as a consequence of this pandemic. The most drastic measure is that since March 28, non-nationals are not allowed to enter, therefore companies that need to visit China to see some type of business, contract, production monitoring... right now will not be possible. Even those people who have factories, subsidiaries, and their managers here will have to return, it will be complicated for now.

However, there are other types of measures that the Chinese government is going to apply bilaterally depending on the treatment that certain countries give to China. This is nothing new, to the extent that the Chinese government considers that some country is harming its commercial interests, China makes certain restrictions. Luckily, relations with the European Union and Spain are not in a bad moment, comparatively speaking with other countries. So I believe that the products that Spain is exporting to China are not going to be affected by any type of restrictive measure due to the pandemic.”

What is the presence of Banco Sabadell in the country? 

GD: “Banco Sabadell currently has two representative offices in China. In 1991 it opened an office in Beijing and in 2005 a second representative office was opened in Shanghai. The Beijing office occupies northern China and the Shanghai office covers the south and also covers Hong Kong, Taiwan, the Philippines, Korea and Japan. It is one of the regional offices we have in Asia.” 

How can Banco Sabadell help Spanish companies that are already in China or want to start selling or doing business in the country? 

GD: “We have seen the needs of Spanish companies that come to China to invest or export and the bank is providing support in three segments of activity: support with local Chinese banks, providing support to these companies through guarantees; We are also providing support to Spanish companies that are exporting or importing, or connecting these companies with their Chinese importers or exporters or their banks so that these operations are carried out through the most efficient channels. And another angle in which we are also quite active is providing support to Chinese companies that are operating in Spain and that need our financial support.” 

Finally, some advice to companies that are thinking of taking the step of entering the Chinese market: is it a good time?

GD: “Obviously it would depend a lot on the sector… there are very few unadvisable sectors in China. 

I would tell them to do their homework and understand that China is a very modern but very large country, it is a kind of mini-continent. The rhetoric that China is a market of 1.400 billion inhabitants is not superfluous, China is a tremendous market and a tremendous supplier of many products, and China's future is well secured. "I don't believe right now that everyone has to come to China, but I do believe that China is a country for everyone."