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Croner-i: Chinese ways of doing business

Posted by Croner-i team on 12-Jun-2017 16:09:00

Some Western companies regard China as a difficult place to do business but taking the time and trouble to understand the Chinese ways of doing business can be very rewarding. Find out more about trade opportunities and common business mistakes in our quick guide.

Why Select the China Market?

  • China’s 1.38 billion people make up 18.72% of world population. They purchased £15 billion of British goods, scrap, and raw materials during 2015. With £3 billion of gold sales included, the record total for 2015 reached £18 billion.
  • China claims 700 million people (or 20% of the world’s internet users, compared to UK’s 2%) have internet access.
  • GDP growth dropped to 6.9% in 2015, with the 9% of 2011 a distant memory. Despite it being the lowest for 25 years, it compares favourably with other markets such as the EU, where 2 or 3% growth is classed as “good”. USD GDP per person in 2015 was $8659, but — based on PPP (purchasing power per person) in local currency — China ranked No 1 ahead of the USA in 2015.
  • One of the world’s top 10 largest economies, China continues to invest in massive infrastructure developments and export opportunities exist for foreign business, particularly in the energy, telecommunications and transport industries.

Trade Caveats

According to China trade experts, some UK companies make their first big mistake even before leaving the UK for China, because they fail to take action on supplier or distributor/partner due diligence in advance. After arrival in China it is often too late. A common misperception is that corporate due diligence information is harder in China to obtain than in the UK when, in fact, surprisingly it is easier in China where much is obtainable quickly. UK firms need to protect their intellectual property (IP) before they leave the UK, otherwise over-zealous or unscrupulous prospective China partners may register the UK firm’s IP and trademarks in advance to gain bargaining power.

Another mistake we see is the UK partner selecting a China partner of the wrong scale — either too big or too small with mismatches in aspirations and resources. Money is worth four times more in China, measured by purchasing power, so in negotiations expect your prospective partner to behave very carefully with money.

UK exporters can fail on standards compliance: order qualifiers. To succeed in China, UK companies need to invest resource both in time and money. Products need to be market ready and in many cases this means an investment in compliance which is not an option but a must. It is in our opinion pointless exhibiting non-compliant product on a UK Pavilion because, despite the usual massive levels of interest, when the answer is “no” to the key question of “Is your product compliant?” Chinese buyers simply move on to someone who can say yes!

Would you like to read a full version of our Trading with China report for importers and exporters?

Read more

Topics: All posts | International Trade

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