Economy, Business And Markets

China Remains Confident in Face of Western Competition

China Remains Confident in Face of Western CompetitionChina Remains Confident in Face of Western Competition

The comprehensive deal on the Iranian nuclear issue was made only a fortnight ago, yet western companies, excited by Iran’s rich oil reserves and enormous market, cannot wait to return to the Middle East country.

The upcoming influx of western companies is bound to influence the Chinese companies that have been exploring the Iranian market for years, Xinhua reported.

Yet Chinese companies say they are not afraid of the competition. Instead, they hope to give full play to their own advantages as well as the opportunities created by the lifting of sanctions (imposed against Iran over its nuclear energy program).

Western companies are rushing to Iran and they are coming faster than many have expected.

Less than a week after the deal was struck, Sigmar Gabriel, minister for economic affairs and energy and vice chancellor of Germany, led 60 business delegates to visit Iran and met with counterparts in the country. Many of the delegates were high-ranking executives from Siemens, Daimler and other famous German enterprises.

The delegations of German Industry and Commerce estimated that the volume of German exports to Iran will quadruple in the next four years to €10 billion (about $10.9 billion).

Following their German counterparts, French businesses are also preparing to return to Iran. French Foreign Minister Laurent Fabius announced that he would visit Iran on July 29, the first of its kind in 12 years.

Although Fabius would not bring a large business delegation with him for the visit, officials from the French Foreign Ministry said that a delegation of 80 French companies would visit Tehran at the end of September.

Fabius said he believed that French companies would not be “penalized” for the French government’s tough stance in the negotiations because of the important role French businesses once played in Iran before the sanctions.

French companies such as Renault, Peugeot and Total were once important players in the Iranian market, but were forced to exit due to sanctions imposed by the United States and the European Union.

Other European countries, such as Spain, Britain and Sweden, are also planning to make their first moves to return to Iran, as demonstrated by the advertisements for European cars and luxury goods in the streets of Tehran.

  Competition for Chinese Firms

The westerners are coming to Iran. This is not only a frequently discussed topic among Iranians, but also among the Chinese companies there.

Chinese companies have made impressive progress in the areas of oil, finance and motor manufacturing in the second-largest economy in the Middle East, partly thanks to the vacuum created by the departure of western companies when the sanctions were imposed.

At present, Chinese cars have an approximately 10 percent market share in Iran and one can easily spot a China-made Chery, JAC or Lifan on Tehran’s streets. In the oil industry, PetroChina, Sinopec and China National Offshore Oil Corporation are active in Iran.

In addition, China’s companies have also made significant breakthroughs in Tehran’s subway and major railroad projects.

But now, western companies are knocking on Iran’s door, waiting anxiously to be let in, and Chinese companies are starting to feel the pressure.

Zhang Guibing, general manager of Chery Mobile in Iran, said western car manufacturers such as Ford and Chevrolet have already completed the approval process and are poised to enter the Iranian market the minute the sanctions are lifted.

Many Iranians have halted their plans to buy cars, waiting for more options, Zhang said.

Zhu Jiyou, an executive from Sinopec’s office in Iran, said that the return of western companies will mostly affect Chinese business in the field of industrial products.

Many Iranians still prefer western products if they are available.

 Chinese Firms’ Advantages

While Chinese firms in Iran are now facing competition from western companies, they also have their own edge in Iran’s upcoming new era.

Firstly, Chinese products cost less. The gross domestic product per capita in Iran is less than $6,000. Meanwhile, the average salary of an ordinary Iranian employee is only half of that of his Chinese counterpart.

Even though some Iranians prefer western products, they often simply cannot afford them.

Liu Zuo, a Chinese businessman who has been selling LED lighting fixtures in Iran for several years, said every month he can sell three containers to Iran.

“Now China makes about 80 or 90 percent of the world’s lighting fixtures. Western competition? I am more concerned about the competition from China,” Liu said.

The prices of Chinese products are much lower than those of western ones, so even though a few rich Iranians favor western products, Chinese products are still being purchased in much larger quantities there, Liu added.

 Lifting Sanctions Can Benefit All Sides

Chinese companies in Iran also believe that lifting the sanctions against Iran can benefit all companies in the country, regardless of their countries of origin.

For instance, the rial, the Iranian currency, has gone through some dramatic fluctuations in the past few years, which have made doing business in Iran very difficult and risky for foreign firms.

Once the sanctions are lifted, the Iranian government will have much more leverage to stabilize its currency with the new income from oil sales.

In addition, once Iran returns to the Society for Worldwide Interbank Financial Telecommunications, it will be much easier and safer for capital to enter or exit the country.

Iran has the world’s fourth largest oil reserves and a population of 80 million. All companies, Chinese or western, can benefit from the new changes in Iran as business is not a zero-sum game.