The Background to Selling in China
There are really such a lot of materials out there when you start talking about how to be successful in different export markets. However I think most experts would agree that China is a little bit different. In this series, I’m going to cover some of the most important points to consider when entering the market.
The country is huge, so don’t assume that “China” is the same wherever you happen to end up visiting. You wouldn’t expect New Yorkers to think, speak or act in the same way as Californians; or Aberdonians in the same way as Londoners so don’t assume about China either.
The country is basically the size of a continent and made up of many regions. The regions have their own specialities, culture and often even language. In 2019, the population was approx 1.4 billion, making it the most populous country globally (although due to differences in birth rate, India may reasonably be expected to take over that “title” in the next few years).
China has pretty much all types of climate zone, but despite the vast distance from west-east only one time zone (GMT +8) without any changes for daylight savings. That can easily catch unwary visitors out as you’d expect a country of that size to have several time zones (like Russia or the USA). Consequently, almost all types of products have at least some potential in China, as all kinds of environments are available.
China: The Middle Kingdom
It’s important to realise that a Chinese person simply doesn’t look at a map of the world in the same way that you do. I’ve seen this many times with European companies who present their successes in “small Eastern European republics” that the Chinese audience may have never even realised were independent countries as they are so small (eg. Montenegro). If you visit and your presentation includes a world map showing Europe at the centre, then be prepared for a few puzzled glances. That’s not the way as a Chinese person thinks about it.
For the Chinese people, China is the middle kingdom. Even the character in Mandarin that is used to denote the country shows this. When you start to think about selling to China you need to see the matter from a completely different perspective. Be prepared to think differently. Your Chinese customers are going to see their country as the centre of the world.
World’s No. 1 Consumer Market
Even before the COVID-19 outbreak in the beginning of this year several experts had estimated that China would overtake the USA as the number one consumer market globally in 2020. Now it seems that this is confirmed as the US is suffering so heavily with the pandemic.
According to the latest reports, the Chinese economy is recovering even faster than the International monetary fund expected and is forecast to have a plus of 1.9% for 2020. In the third quarter the Chinese economy grew by 4.9%. The International monetary fund has even forecast growth of 8.2% for next year.
The fastest growing part of the economy is still ecommerce, making cross-border e-commerce an attractive proposition for market entry for smaller brands. Events such as Singles Day (the world’s largest shopping festival) generate huge opportunities, but you need to understand the details in order to succeed there.
China is complex – don’t underestimate that
The sheer size of the Chinese market can be overwhelming for new entrants. Often companies underestimate how fiercely competitive virtually all sectors are. Once upon a time, China may have been a kind of El Dorado for western companies looking to enter. (In a similar way that consumers in Eastern Europe after the collapse of the Soviet Union were also hungry for new brands.) Those days are long gone however – now, there are more brands in the country than you will find anywhere else in the world. .
Doing business in China can be incredibly complex. There are several reasons for this:
- it’s simply such a huge country – distances can be enormous, and supply chains extremely long
- the culture is completely different to anything that you might have encountered in Europe or in North America. Chinese culture is extremely ancient but has experienced truly unprecedented growth in the last decades. This development in recent years has been considerably different to the rest of Asia.
- logistic requirements are simply more complicated than for many other markets. There is such a huge domestic internal market to cope with. You could possibly compare with somewhere like Russia which also has challenging domestic logistic conditions. Chances are that you will have more layers of distribution than is the case in other countries.
Do the background research
Don’t ever be tempted to skip the background research for any project you might want to do in China. Yes, the huge difference in language and culture can make the market appear intransparent, however there are steps you can take to reduce your risk. Especially in these times where it’s hard to travel to Asia then this is more important than ever.
Use the resources at your disposal
Most countries have support systems in place to help would-be exporters. This probably starts with your local chamber of commerce who may be able to point you to further more specialised help. Many countries have a commercial section at the embassy with commercial attaches who may have a team to support businesses. This might mean they obtain credit reports and do background checks, or even make visits on your behalf (eg right now when travel is limited). Of course, you still have to check any recommendations that you receive, but it is a start. In China this can be especially valuable if you need a translator or interpreter. The commercial section may be able to offer this service or recommend someone. Same goes for lawyers, business consultants or tax specialists.
Have someone to “translate” the market
It can be invaluable, especially in the initial stages of a market exploration to have someone at your side who can “translate”. I don’t mean literally from a language perspective (although that helps too), but someone who can tell you what is really going on. This can be especially critical when negotiating (I’ll talk about that in a later post).
Having a colleague or trusted advisor who can help you navigate the relationship building phase can save you from a lot of headaches. This kind of “bridge function” helps the project progress more smoothly for both parties. It may be hard to find the right person that you can trust, but it is worth investing the effort. At the beginning of a relationship, it’s really frustrating if you feel that the partner is perhaps not interested in your product, when really he’s just showing a poker face (as a cultural reaction).
If you have someone who can “translate” in cultural terms what is really going on and WHY the people you are negotiating or discussing with have said certain things, it can give you a much stronger basis for your future relationship. This will help you avoid frustration if you understand that you are not being treated badly by a potential partner, but that he is simply avoiding losing face or making a tactical play.
The practicalities of getting started and how to actually manage the business with your partner will be discussed in the next part of this series.
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If you are interested in selling in China, I have a whole library of posts about entering and working in the market that you might also find these posts interesting:
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