Ireland isn't doing enough to boost trade with China
HSBC's Irish chief, Alan Duffy, warns of missed chances
It is not surprising that the main focus for most Irish firms and policy makers when it comes to China has been on trade opportunities. With the country overtaking Japan as the world's second largest economy as a result of more than a decade of double digit economic growth (and forecast by many to take the number one spot from the US by 2030), the market opportunity is obvious.
Ireland has not been slow to take advantage of this and exports to China totalled more than €4.3bn in 2012 with indigenous firms accounting for more than €200m of it.
Even more encouraging than the headline figures is the growth rate which has seen indigenous exports to China growing at well over 10pc in recent years.
The story is much the same across the EU which has seen trade with China grow by more than 500pc over the past decade.
But there could be an even bigger opportunity for Ireland - in the form of inward investment from Chinese firms.
Overseas investment from China is forecast to reach more than €120bn within the next two years and the Chinese government has announced a highly ambitious plan to invest some €100bn a year into Eastern Europe by 2015.
With recent Chinese investment in the aircraft lessor space here attracting a lot of media attention, FDI from China will be a major opportunity for Ireland if we make the right moves now.
The contribution to Ireland's economy made by FDI from countries such as the US, Britain, Japan and Germany over the years has been enormous. The hard work put in by IDA Ireland in these target markets and the policy decisions made in Ireland in order to make this an attractive destination for new investment projects must now be repeated in relation to China.
We cannot just sit back and wait for the investment to come to us.
There are challenges including language barriers and cultural differences of course, so we must strive to make this country as friendly to Chinese investment as possible.
Important steps have already been taken in this regard. The IDA is very active with offices in Beijing, Shanghai, and Shenzhen. Many of our third-level institutions now offer courses in Chinese and many business courses now have it as a module.
These steps should only be seen as the beginning though - just look over at the UK. At present, London is established as the only offshore renminbi trading centre outside Asia. A recent bond issue in RMB facilitated by the UK government allowed London based firms to invest directly in Chinese stocks and shares in RMB. Moves such as these position London as the western hub for RMB - an enviable position.
It is our firm belief at HSBC that the renminbi will be one of the global reserve currencies of the 21st century - just as the dollar was in the 20th century and sterling was in the 1800s. Indeed, in December 2013 the renminbi overtook the euro to become the second most used currency in global trade finance after the US dollar.
If Ireland is going to position itself firmly alongside our nearest neighbours as a destination, then the widespread adoption of the renminbi as a trading currency is a must.
All the evidence points to Chinese companies being far more comfortable trading in renminbi.
However, if we are able to offer them not only access to a renminbi trading partners but a supply base and business partners in financial and professional services who are also comfortable in doing business in renminbi we will have taken a major step towards capturing our share of FDI.
There's good reason why, with the right framework in place, Ireland is an attractive option for Chinese companies - just look at the sectors in which the investment is likely to occur.
In its initial stages Chinese overseas investment was focused on natural resources and then on infrastructure in order to meet the needs of a rapidly developing high growth economy. Now, however, investment is shifting to goods and services.
And there is a lot of good news for Ireland in that shift. Chinese overseas investment in these goods and services is concentrated on the automotive, telecommunications, and food sectors.
While Ireland may not be particularly strong in the automotive area, we have a proven track record in the other two.
Dublin's status as Europe's digital capital as well as the presence of hardware leaders like Intel and Apple gives us IT and communications credentials to equal any other location in the world.
The success of our dairy sector in supplying high quality infant formula to the Chinese market has given us a vital proof point for the food industry and our exporters in that sector are already acting as tremendous ambassadors for the country.
These advantages present a window of opportunity for us which will not remain open for long. The government and the development agencies along with those business sectors which support inward investment need to come together to develop a coherent China strategy which will see Ireland be as successful in attracting investment from that source in the current century as it was from the US in the last.
Alan Duffy is the chief executive officer at HSBC Ireland
Sunday Indo Business