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How to do business in China post COVID-19?

Ukie member Crayfish.io gives us expert insight into doing business in China, post COVID-19.

China’s Q1 Data shows economic recovery 

Newly released Q1 data for the Chinese economy shows that there has been a significantly large increase in total trade. The rise in imports and exports this year highlights a strong rebound in the Chinese market, with further robustness proven in 2020, as China was the only major economy to grow GDP (2.3%). Moreover, China has overtaken the United States to become the largest manufacturer, and it is well on its way in transforming into the largest consumer market within the next 5 years. Whilst Chinese household consumption still lags behind the US, this provides an abundance of opportunities for growth within consumption markets, which will also see support through favourable government policies providing very advantageous market conditions for businesses to break into.

China’s 14th 5-year plan highlights opportunities for British tech firms

China adopts a top-down approach for economic planning - every 5 years the government announces its blueprint for the goals it wants to achieve, and these goals are carried down from the central government to ministries, provinces, cities, towns and villages. This year execution of the 14th 5-year plan begins. This marks a fundamental shift for China to:

- Draw on domestic sources for growth more,

- Upgrade and digitalise its manufacturing and industrial facilities (within advanced manufacturing and other key strategic areas)

- Engage in more international trade.

In order to achieve this high-quality growth and sustainability, innovation and digitalisation is at the core of these goals In line with trends within industrial policy such as “Made in China 2025”.  As China looks to become an international authority of standardisation setting as part of the new China Standards 2035 Plan, there are opportunities to mutually develop standards together between UK and China. Furthermore, there is a strong emphasis placed on climate change, a sector that is truly of global concern; these mutual challenges provide opportunities for collaborations between Chinese and foreign governments, despite ever-challenging geopolitical situations.

What are the main barriers to enter and expand in China?

Whilst the robust and swift economic recovery reflected in the Q1 data provides significant signalling for opportunities for Western businesses, China is sometimes considered as an intimidating market to conduct business in. Some of the routinely cited barriers to do business in China are IP risks, along with language and culture differences, talent shortage, and difficulty to expatriate profits (to home country of non-Chinese MNE). Other prevalent challenges include rising costs of operating in China, competition from local companies (and sometimes ‘unfair’ preferential treatments, given to local businesses to foster domestic growth) , opaque regulations that are often subject to varied interpretations across the country.  However, none of these challenges are insurmountable if companies can take a systematic approach to tackle them.

How can businesses increase their chances for success in China?

I suggest businesses to take on a ‘PPE’ approach to take advantage of the trade opportunities presented by China’s recovery:

 P – The first P is for PLAN. Start with market research and try to develop a comprehensive understanding of your business’ competitors in the Chinese market, next identify and highlight your USP to differentiate yourself. You may also need to consider working with a local partner in the market, so during this initial planning stage it would be useful to identify the right partners for your business.

 P – The second P is for PREPARE. This is the stage in which you need to develop a roadmap detailing how your business will enter into the Chinese market and will include things like how to protect your IP or trademark in China; considering whether you will adopt a Chinese name for the business; localising digitised content for the business, also considering cultural differences to ensure the content comes across well and will allow your brand to be understood in the market.

  E – the final stage is ENGAGE, which is arguably the most important step in implementing your business plan in China. As face-to-face engagement is currently limited, digital channels will be key to establishing this engagement. A good option could be to hire a local representative. If your business is already selling to China, encourage and incentivise your customers to spread the word of your business, and hire distributors for additional regions in China that can help to expand your engagement.

 As the Chinese say, “a thousand miles journey starts from the first step” - if you are diligent in the process, your efforts could potentially pay off substantially for your business in the years to come.