China's mighty retail offensive

The immense production of goods in the world's second-largest economy demands new export markets, and Chinese businesses are targeting the lucrative GCC.

The opening of the China Mall in Ajman is a strong indicator of China’s growing retail presence in the Gulf.

You might assume that Ajman's latest mall is filled with big brands such as Starbucks, H&M and Carrefour, which are already peppered throughout the UAE. But you would be wrong.

The Dh400 million (US$108.9m) Ajman China Mall was cast with a distinctly different flavour in the hope that consumers would give it more than a second look.

Throughout the hospital-white halls of the shopping centre on the outskirts of the northern emirate, customers can pick up herb jellies, electric pots, corn-flavoured sweets and cheap luxury-style bags from China.

This mall of 1,000 stores is the latest sign of China's growing retail presence in the Gulf.

Adnan Dahnous, the director of the Gulf Chinese Trading Corporation, which developed and owns the mall, expects demand for China's products to grow as their quality increases.

"Now the Chinese products are improving a lot," he says. "And the price of Chinese products [is] low, if you compare it with European or American products."

As their products become increasingly competitive in quality on the global stage, Chinese companies can be expected to increase their presence in lucrative markets outside their home base, with the Gulf earmarked as a key export region.

Dubai's Dragonmart, which houses nearly 4,000 retailers from China, has been trading since 2004. But this year has brought two new Chinese retail entries to the GCC: the Ajman China Mall and a similar Chinese retail complex in Riyadh, Saudi Arabia.

Riyadh's China Mart, built at a cost of 300m riyals (Dh293m) and covering more than 100,000 square metres, opened last month. China Mart, thought to be the first of its kind in the country, was developed by the Saudi-Chinese joint venture Chinese Competitive Spirit, which plans to establish similar centres in Dammam and Jeddah, according to media reports.

In an another development, Great Wall Motor, which has been trading in the UAE since 2001, launched its first line of passenger cars in the Middle East last week. But the company has to contend with at least two new Chinese competitors in the UAE. Haima, which is allied with the Abu Dhabi company First Motors, began selling vehicles in the Emirates at the end of last year. Last month, Zhengzhou Nissan Automobile, a joint venture between Nissan and China's Dongfeng Motor, opened its first Middle East showroom in Dubai.

Andy Barnett, an economics professor at the American University of Sharjah, says the entry of Chinese exporters into foreign markets has accelerated.

"You've got this enormous economy, growing at a rapid rate, while their currency is pretty undervalued, which gives them a comparative advantage around the world," he says.

China, which has the world's largest population at more than 1.3 billion people, has a total GDP of more than $5 trillion. It is the second largest global economy, behind that of the US, and has averaged annual growth of about 10 per cent for the past 30 years.

To illustrate the country's industrial might, China is now the largest global exporter, shipping $1.2tn worth of goods every year.

Analysts say the Chinese government is determined to keep its GDP growing at double-digit rates, with companies urged to seek new markets to support the immense export drive, Prof Barnett says.

"They are producing beyond their ability to sell those items domestically," he says. "Income hasn't risen enough in China to be able to consume those goods, and they are going to continue to be interested in promoting their exports."

And the UAE is a particularly attractive target because it is relatively easy to enter, he says.

For Zhho Wei, originally from Huzhu City in Zhejiang province of China, it was the potential of bigger profits in the Emirates that pushed him to make the move here last summer.

In October, he and his brother did a soft launch of their furniture booth in the Ajman China Mall, then opened officially last month.

"The margins are a little better here than when you're in China," Mr Zhho says. Mike Cui, the general manager of Great Wall Motor in the Middle East, says Chinese retailers will continue to extend their reach as their country's economy matures.

"We should grow up," he says. "We should compete with the world brands to improve ourselves."

Although there have been calls for China to revalue its currency, the yuan, and stop flooding the world market with cheap goods, a revaluation would only slow, not stop, the export boom, Prof Barnett says.

"Pace is the only question," he says. "How rapid will it grow?"