An interesting article from the Wall Street Journal, also commented on Michael Wade's blog Execupundit, clearly points to China as the great winner of this economic crisis.

Ironically, the fact that the Chinese people cannot readily access credit saved them from the worst part of the downturn. For years the world thought that China's finance system was "immature". Now there is another explanation: the Chinese do not believe in credit - and therefore do not rely on credit - to the extent Western economies do.

As a result, it's not a global economic crisis (which implies that the whole world is losing). China emerges victorious. It's not just any economic crisis that will fade away and restore pre-crisis situation. It's a game-changing crisis.

As the Wall Street Journal highlights, the great looser is likely US.

There is more cash sloshing around the world than most people think. The problem for the U.S. and to some extent Europe is that this cash is now in unfamiliar places, some of which -- as John McCain reminded us on the campaign trail -- can be found in countries that "don't like us very much."

Ok, so you've got this supplier in China and this client in USA, now what? I mean, how do you actually make and collect payments? Whether you enforce your purchases and sales through letters of credits or other means, at some point money has to cross the borders and possibly change currency. Every bank, including yours, will tell you that they can perform international transfer of funds. You might assume that, similarly to cheque accounts and other common banking products, banks do not differentiate on international payments. You would be wrong: fees greatly vary among banks, as well as services and speed of execution.

Moreover, fees are often country-regulated. In Belgium for example, intra-EU bank transfers have to be free (you read me well: 0$), with no limitation on amount, currency, or country. Compare that with ridiculously high fees to transfer money between Canadian and US banks for example. A transfer from a Belgian account to non-EU account is also much cheaper than the equivalent operation in a North-American bank. The good news is, any organization can open an account with a Belgian bank if it has a supplier or client in EU - any supplier or client in EU, whatever the amount transferred. In other words, Canadian companies that need international bank transfer should seriously think about opening an account in Belgium (or any other country having favourable bank regulations for that matter, but I don't know any other).

When facing shrinking market and loss of consumer confidence, companies' instinctive reaction is to lower production, become obsessed with saving costs, and eventually downsize. Basically, companies tend to hibernate during the economic winter. Well, there are two obvious problems with this reaction. First, they might be missing opportunities because recession does not affect equally all sectors and all geographic areas. Second, and contrarily to real winter, we do not know how long the economic winter will last, which triggers questions like "what if we don't have enough food to live it through?" Needless to say, this kind of conservative reaction is probably a (very) bad idea.

The appropriate reaction is to offset the expected shrinking by entering new markets that are not affected as badly as our traditional markets. USA is entering recession (this is now beyond discussion). Since economies of Canada, Western Europe, and Japan significantly depend on US economy, they will be seriously affected. On the other hand, China, India, and Central and Eastern Europe countries undergo large internal growth thanks to scores of people entering middle class and increased availability of disposable income. In other words, their growth only moderately depends on export and therefore they might go through the recession relatively unscathed. Although companies have to investigate carefully the opportunity to export to these markets, it is certainly the most sensible way of living through the recession.

GDP growth - Worldwide vs. Emerging countries

This figure shows the changes in GDP for world average vs. emerging countries. Assuming that GDP growth is a relatively accurate indicator for economic health, we clearly see that although all economies are slowing down, emerging countries will still deliver good performance.

In fact, exploring healthy markets makes sense whether or not our traditional markets are in recession. The difference is that now it's not just a question of increasing profit, it might be a question of survival. Local SMB's usually suffer from globalization. Now there is an opportunity to benefit from it!

This post is partly inspired from Peter Hall (Export Development Canada Chief Economist) conference about Canada's Global Export Forecast. The report can be found here.

When doing import-export, we often collaborate with people we are not familiar with and even never meet in person. Our business nonetheless depends on every link in the supply chain doing its job properly. In international trade, only large companies with worldwide offices can afford enforcing contracts and agreements. We small businesses can bind our suppliers with as many contracts as we want, the success ultimately depends on how well we initiate and maintain relationships. Because let's face it, in case of trouble a legal action would generally not be cost-effective.

An example...

The goods you ordered in Shanghai are supposed to leave tomorrow by boat. The boat is full but then another freight forwarder with good relationships (guanxi) calls the transporter. Suddenly, your precious container is unloaded and replaced by a container of the well-introduced freight forwarder. As an importer recently told me: "this happens a lot in China". Your supplier calls you next day and is very, very sorry to tell you that you'll have to wait for next week's shipment. It can be devastating for your business. And you can do nothing about it.

Actually, you can do something so that it doesn't happen: make sure you have good relationships or delegate the work to someone who has good relationships locally. For example, it would be wiser to let your supplier finding a freight forwarder by himself (using CIF instead of FOB incoterms) because he probably has better local connections. Of course this might not be realistic, so your only solution to mitigate risk is to plan some slack for delivery times. Oh, and do your due diligence, too. There's a lot of monkey business going on out there.