Strong growth potential for Spanish exports to China and ASEAN

Increasingly close relations between Spain, China, and ASEAN countries offer significant opportunities for Spanish companies. This is one of the conclusions of an HSBC report carried out by EsadeGeo, “Economic relations between Europe, China, and ASEAN: an opportunity for Spanish companies”, one of the most comprehensive reports of its kind in Spain.

Despite the current slowdown caused by COVID-19, economic relations between Spain and China are stronger than ever. China is the tenth-largest destination for Spanish exports, worth EUR6.8 billion in 2019, representing 2.3% of total Spanish exports. With private consumption, the service and technology sectors gaining in importance, this opens up new opportunities for Spanish companies.

Export opportunities in consumer goods and industrial products

With average annual income per capita in China having grown to USD16,000 and purchasing power expected to increase further, there is strong potential for Spanish consumer goods. Comprising an estimated 400 million people, the country has the largest and most consumption-oriented middle class in the world. Chinese consumer preferences increasingly resemble those of the European middle class, focusing on the environment, health, and the quality of products, according to the report.

Industrial modernisation, as laid out by government plans such as ‘China 2025’, presents another opportunity for Spanish and European companies. Complementing its strong local technological development, the country seeks to attract foreign investment, in its drive to build up its industrial and technological capabilities. In a country with more than 800 million internet users, the growth of e-commerce is one of the key areas opening up new opportunities for Spanish players.

Potential for export growth in agri-food, health and wellness and urban services

With Spanish agri-food exporters and the “Spain Brand” (Marca España) well established in the Chinese market, there is significant potential for further expansion, given China’s increasing demand for wine, oil, and meat products.

The health and wellness industry is another sector presenting significant potential for Spanish companies. While in the children’s segment there is a growing demand for safer and better-quality products, there are increasing opportunities also in the segment serving older customers, with 25% of Chinese expected to be over 65 in 2050. According to the report, the textile, footwear and home furnishing industries present further potential for Spanish companies, which can expand their market presence through exports or by opening new points of sale in major cities.

Spanish companies are well-positioned to support China in achieving a key objective of its 'China 2025' plan: to develop an “intelligent industry” based on technology such as the Internet of Things or artificial intelligence. According to the report, there is significant demand in China to import products such as electric vehicle components or semiconductors, sectors in which Spain stands out.

With the services sector developing rapidly in China, there is a growing need in urban services management, particularly in water and waste management. Likewise, Spanish companies are well-positioned to offer leading technology services associated with smart cities.

Spanish investment in China: motor vehicle manufacturing is the leading sector

As regards, industrial sectors, motor vehicle manufacturing, metal products, metallurgy, and electrical materials account for 37% of the total and are the leading sectors in terms of accumulated Spanish investment in China. This reflects the broader importance of manufacturing and industrial activities, which are the most important areas of Spanish investment in China.

The second sector is financial, followed by the wholesale and retail distribution segments, as well as the agri-food sector.

The steepest growth in their China investment is reported for Spanish service companies, seeking greater proximity to end-users. A similar trend is seen for law and consulting firms that have set up offices in the main cities to serve both Chinese and Spanish companies. Also, there is an increasing number of Spanish investments with a high technological component.

ASEAN, an area with great potential

According to the study, Spain has intensified its trade relations with ASEAN countries in recent years. However, trade with ASEAN countries is far from being as important to Spain as relations with other European or Latin American countries.

In addition, the report finds significant growth potential for Spanish companies also with respect to ASEAN. Having registered strong growth rates for years, the region aspires to become the fourth largest trading block in the world by 2030 and one of the main destinations for foreign direct investment (FDI).

While the European Union has become ASEAN’s third-largest trading partner after China and the United States, Spain's presence has been limited to the export mainly of capital goods, with its investment largely focused on specific operations in particular sectors such as hotels, oil, and steel. In 2018, Spain’s exports to ASEAN stood at EUR3.58 billion, representing around 40% of its import levels. The main products exported by Spain are clothing and footwear, as well as machinery and office supplies.

ASEAN region offers many excellent business opportunities for European companies in general and Spanish companies in particular: ranging from infrastructure to agriculture, and including renewable energy, car parts, capital equipment, and machine tools. These are sectors in which Spain has large companies with highly competitive products and services.

Mark Hall, CEO of HSBC Spain, said: “China and ASEAN are regions which offer Spanish and European companies great opportunities for business growth in the coming months and years. Thanks to our strong presence in these key regions, we will continue supporting companies in their internationalisation, offering our services and expertise to help them maximise their benefits. There are significant opportunities both for Spain and Europe and for our Asian partners, so it will remain crucial to further strengthen our mutual ties. This will help us build an even more solid and long-term relationship from which both sides will continue to benefit.”

Javier Solana, president of the EsadeGeo-Center for Global Economy and Geopolitics, adds that “over the past forty years Spain and China have had an excellent relationship and Spain has played a very significant role in bilateral relations between Europe and China. The opening up of the Asian country to trade offers a great number of possibilities for Spanish firms”.