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The “China Option” has to be on the agenda for any ambitious company in Ireland, according to Róisín Brennan, Chief Executive of IBI Corporate Finance. Brennan was speaking at a special seminar on M&A Opportunities in China hosted by IBI Corporate Finance. The seminar heard from a number of experts on the Chinese economy and from corporate advisers who have helped broker deals in China. According to Brennan, China is changing the way the world does business; “the fact that the current wave of stock market volatility began on the China Stock Exchange has dramatically illustrated the way that China has moved from the edge to the centre of the world economy.” Brennan continued: “The number of Irish companies doing business in China will continue to grow dramatically in the coming years. Already over 280 Irish companies are now doing business there – up from just 10 in 1999 - and the volume of trade undertaken between Ireland and China is growing dramatically also – up 19% in 2006 alone (to almost euro six billion).” Brennan forecast that as well as seeking acquisition opportunities, Irish companies will increasingly look to China for outsourcing solutions; “As labour and other costs have increased in Ireland, more and more companies are exploring the outsourcing of their production needs to low-cost China. This allows Irish companies to remain competitive internationally, as well as opening new market opportunities. In this way, China can actually help Ireland rather than hinder its growth” The seminar also heard from a number of expert speakers on China. Mark Lerner from Morgen, Evan & Company, Inc. (investment banking firm with offices in Shanghai, Tokyo and New York) said that China was just 20 years away from becoming the world’s largest economy; “this year the country will overtake Germany to become the world’s second largest car manufacturer and in 2005 there was more new office space built in the greater Shanghai region than all of the existing office space in New York City.” Lerner said (see presentation) that, since 1978, China has realised an average real Gross Domestic Product (GDP) growth rate of over 9% annually. He also pointed out that within the next three years, the number of families in China described as middle class is expected to double from 50 million currently to 100 million. In respect of M&A opportunities, Lerner said that China has significantly improved its legal structure in an effort to promote transparency and that generous tax incentives are on offer to attract foreign investment. Also speaking at the seminar, Michael Laffan, former Managing Director of Waterford Stanley, said that the company had chosen to outsource elements of its production process to China and had seen core costs for work undertaken in China being some 40% lower than comparative costs in a UK factory of twice the scale. According to Laffan, the ability to successfully outsource to China had made possible the increased investment in marketing spend and retail infrastructure, which was critical to the ongoing development of the Waterford Stanley business in Ireland. Finfacts Comment: Most Irish exports to Asia are currently made by foreign owned firms. China is of course a very important market but a reality is that the UK is till the principal market for Irish -owned firms. Further points are made in the report accessed below. The challenge for Irish firms would be presented more realistically, if the breakdown of Asian exports between Irish-owned firms and foreign based concerns in Ireland, was available. As the latter do not have generally have separate Irish marketing facilities, while they were responsible for 92% of Irish exports in 2006, Irish policymakers have little opportunity to influence them. New IBEC report on trade with Asia says that €10 billion annual exports should be target
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