Can your business succeed in China?

Before considering entry strategies, a simple question must be answered first: ‘Can my business succeed in the Chinese Market?’

The effects of the ongoing COVID-19 pandemic have decimated global economic growth, with one major exception - China. Whilst the disease’s full impact on the worldwide economy cannot yet be determined, it is a reasonable assumption that, even when business life returns to some degree of ‘normality’, it will continue to exert a drag effect on international commercial activity for some time to come.

While many advanced and developing economies are currently contracting, China has emerged out of the crisis as the pre-eminent global economic powerhouse; having recently posted an impressive set of annual GDP figures (+2.3% for 2020) that most major Western countries can currently only dream of matching.

China market entry - why now?China’s rapidly evolving demographics, rising incomes and consumer spending, and increasingly open business environment, have all helped in recent years to make this market of 1.4 billion people an increasingly attractive option to foreign businesses across a wide variety of sectors. In addition to solid GDP figures, China’s economy, despite experiencing and overcoming the problems related to the pandemic, rebounded rapidly with sustained growth. According to National Bureau of Statistics, median per-capita disposable income increased by 3.8% in 2020, with total retail sales of consumer goods growing by 4.6% year on year and online retail sales by 10.9%. Business Activity Index for Services stood at 54.8%, Index of Services Production grew by 7.7% year on year, with the overall value of foreign owned enterprises rising by 2.4%. 

In 2020, the total value of imports and exports of goods was CNY 32,155.7 billion, an increase of 1.9% over the previous year. Additionally, growth was also recorded across many industry sectors: Manufacturing (3.4%), Mining (0.5%), Power Production and Supply (2.0%), High Tech Manufacturing (7.1%), Equipment Manufacturing (6.6%), Information Transmission, Software and InformationTechnology Services (13.5%), and Scientific Research and Technology Services (9.9%). 

The present global economic downturn, where many home and traditional markets have either been effectively closed, or are severely restricted, makes a compelling case for ‘Now’ to foreign businesses entering a Chinese Market that is a shining exception in a generally bleak outlook.

China represents a huge potential market for foreign manufacturers and service providers, but understanding the cultural issues, where opportunities lie, and how to access them, can be extremely difficult. Entering this market successfully can appear to be an almost impossible challenge to any company with limited, or no, experience of doing business there. 

China based business intelligence

It is in these circumstances that the value of locally based business intelligence becomes paramount. Answering the fundamental question - ‘Can my business succeed in China?’ - would seem to be an obvious priority to anyone contemplating market entry. However, as the long list of failures by Western corporations who thought a ‘cut and paste’ approach was all that was required can testify, an alarming number of foreign businesses do not undertake this one crucial piece of due diligence.

Unless a company actually wants to potentially waste a lot of time and money, and before any resources are deployed to work on entry strategies, it owes it to itself (and its shareholders) to undertake market entry research – using a local, not an internationally based, organisation - to get on the ground information from professionals already located in China; who can help it find the answers it needs as whether to proceed any further, or not.

Not just data

When looking at a China based research partner, it is important to realise that the information required to make an informed decision is not just based on the available data alone. The scope of the exercise requires a much wider understanding of the market place, including such diverse issues as: local culture, cross-cultural comparisons, regulatory environment, competitors, business setup options and potential local partners and distributors.

In such a situation, a locally based team of combined Chinese and foreign professionals is best placed to both thoroughly address the needs and concerns of the client, and to be able to penetrate the market in sufficient depth and detail by leveraging local connections and resources. Additionally, because such a team can truly understand the requirements of both sides involved in the project, they can ensure that it is totally customised to desired outcomes.

When conducting research for overseas clients, or foreign clients already based inside China, my team at BM Consulting (Shanghai) is usually asked to address either 

a) general reports for information e.g. a wider market report, 

b) specific reports that enhance, or confirm, some information already in the client’s possession, 

c) internal effectiveness reports on an existing operation in China. 

Regardless of the nature of the request, we adhere to the three following service criteria:

• Expertise – qualified staff with experience of the project’s market.
• Data – current, market specific, local data.
• Methodology – 
• i) Quantitative: sales data (market results), social listening data (market demand), 
• ii) Qualitative: benchmarked standards and processes.

Can your business succeed in China?

The answer to this simple question can be found from a cost effective professional report. It is infinitely preferable to the severe losses of time, money and reputation ensuing from poor due diligence.