China is the second largest economy in the world, after the USA, in absolute GDP terms. The Chinese economy has been growing rapidly, presenting a very big and rare international business environment.
The import market in China is approximately 24% of its GDP; it is a large market for exporters. China stands 90th in the world with respect to ease of doing business. Imports into China have been consistently growing over the past few decades. The Chinese market is a great place for business, but local expertise is critical to pricing, payments, and continued success.
China business facts
|GDP (billion USD)||11,199|
|GDP per capita (USD)||8,123|
|GDP per capita PPP (USD)||15,535|
|Purchasing power per dollar, compared to the USA||174%|
|Surface area (sq km)||9,562,911|
|% of population living in urban areas||54%|
|% of GDP added by agriculture - industry - services||9% - 43% - 48%|
|Ease of doing business index (1 = best, 189 = lowest)||90|
International business in China: top imports
China is a major hub for world trade. Given its huge land mass, population, a large growing economy, and strategic ports, it lends itself freely to huge International trade.
The top Chinese imports from the world are electronic equipment, oil, machinery, mined raw material, and medical and scientific equipment. The biggest exporter to China is Japan at 163.1 billion USD followed by the United States at about 160 billion USD.
Chinese businesses: how to sell to them?
In the past decade, Chinese companies have evolved to cater to the demand of the global market. In order to do this, they have rapidly grown in all aspects of business, especially product distribution.
Entrepreneurs that are new to China may find the Chinese market challenging, albeit the vast opportunities waiting for them. If you intend to introduce a brand into China, then what are the methods to successfully penetrate their market? How can you start product distribution with as little blunder as possible?
The competition within the Chinese market is stiff due to the continuous development of their business industry. However, local Chinese businesses are more open to newer and more innovative business strategies which may be introduced by foreign players, making it easier for international businessmen to participate.
Marketing in China
The Chinese have a slightly different approach to their marketing practices. Western companies that employ multinational staff have greater awareness about the power of marketing than Chinese local offices that often employ student returnees and expatriates.
Out of the 4 P’s (Product, Price, Place and Promotion) of marketing; most Chinese businesses consider promotion as the only element necessary in marketing. Western entrepreneurs have the edge since they are accustomed to all.
Westerners place more emphasis on pricing and believe in indulging in comparative studies to identify the best pricing strategies for their products. However in China, products that are promoted well tend to sell better. Hence, for a western businessman to succeed in the Chinese market, it would be beneficial for him to develop a local sales team that is proficient in promotional aspects of the business as suited to the Chinese consumer base. Networking and local alliances can be helpful as well.
How to sell to Chinese people?
- Conferences and exhibitions are ideal for initial customer contact with customers. They can launch your business relationships in a hospitable environment, creating a basis for the mutually beneficial bond. Beijing and other big cities within the country have massive convention centers in which there are regularly held trade shows
- Email is exceedingly essential to any Chinese company nowadays. You must make good use of this tool by creating well-structured proposals that are personalized.
- Internet users in China have grown beyond 400 million, so create professional websites that will showcase sufficient information on your company’s mission, vision, products, and services.
- Social media is widely used by up to 92% of the Chinese netizens, while some are actively involved in blogs and forums. You must have Chinese translations of your advertisements to get a broader reach with local users.
- Face-to-face meetings in the workplace will improve rapport between you and your customers, whilst increase the buyers’ trust in your company.
- You must be polite when making phone calls. Apply what you’ve learned from their practices and traditions, to make a good impression.
- Personal networking can result in business prospects. The Chinese like to maintain friendships or personal ties with those whom they do business with.
Tips for successful selling in China
There are various marketing strategies for a large market size like China. To fully penetrate the Chinese business industry, you must put into consideration the things that matter most to the Chinese entrepreneur and the Chinese consumers.
Here are a few tips to support your selling process in China:
- A good listener can figure out the needs of a Chinese customer. Listen to their demands and integrate what you’ve learned in your business.
- Your salesperson must focus on the relationship with the customers. The Chinese cultivate good relationships.
- Western companies are known for their quality goods. This perceived quality should be offset by potentially higher pricing.
- Be methodical because that is appreciated in the Chinese market since some Chinese businesses lack thorough procedures.
- Be flexible and innovative with your offers.
- Negotiation is common in the Chinese market, so be prepared to lower prices.
- Chinese companies want to trust Western suppliers so focus on your credentials and don’t exaggerate.
Competition in distribution is rigid so it is necessary to establish good business-to-business relationships in order to introduce your products and services successfully to the masses.
Estimating the market size in China
Investing in the Chinese market requires estimating your market size. Every business venture aims for profit and international acknowledgment. China has the largest population as of today, which also sums up its massive market size.
There are various methods for researching company performance when examining a market size. This way, your company could deduce strategies from the results of the research, and start approaching the Chinese market with better options for potential customers. Do not forget to weigh the pros and the cons when it comes to choosing which method best fits your company.
- ‘Top-down’ marketing exercise starts from statistics, reports, and other recent studies. From here, your company can plan strategies to penetrate the large Chinese market. Still, the government throws extra caution on publishing statistics and reports on this matter, so it will take you longer to finish market sizing.
- ‘Bottom-up’ approach begins from the direct feedback of the buyers and distributors, interviews from other thriving businesses and personal interaction with suppliers. Then, proposals to supply the demands of the customers will commence. However, some companies may not appear on directories and there is always the issue of individual cultural bias among customers.
- Another technique for market sizing in China involves adding the sales of other companies that thrive within the market. Building a big picture allows you to see the flow of competition, at the same time improve your marketing strategy. However, not all companies publicly post their financial status, so information may be hard to get.
Determining the market size in China also means determining your distribution success in the country. Your investments must withstand the intense competition in the Chinese market, whilst be multiplying your profits ten-fold. See for example the strong Chinese IT industry.
China’s business culture and etiquette
Business relationship in China often starts with referral. The means that the best deals also come from strong recommendations. But with the advent of internet and the competitiveness of Chinese businesses, it is easier now to contact these businesses and make some arrangements. For investments, you may have a direct approach to an investment committee or business advisory.
To the Chinese people, business often progresses to become a social relationship. When you learn to open up with your personal life like your family and aspirations, you will likely experience a strong relationship with Chinese business people.
China: on meetings and negotiations
You must prepare meetings in advance. Make a good introduction of your company by sending written information in advance.
Punctuality is a main thing in Chinese business culture. Being late is perceived as an insult. Small talks happen in the beginning of the meeting. Share your experience in the country and keep it positive.
Gain a positive control over the meeting by sending ahead agenda or what is expected to be dealt with on the day. The Chinese approach is to start with the minor ones. Reverse the process by doing suggestions.
Negotiations with the Chinese
Chinese business people always aim for “concessions,” and they can be really formidable in achieving major concessions. Be strategic about this and learn to compromise, making them feel that they get what they want.
Chinese business people are known for being meticulous, so it will help you greatly if you also do your homework. Study and plan as they will do this, and they do it really well.
Chinese negotiators often show humility and deference to present themselves as vulnerable and weak. This is a known strategy for you to help them get your concessions.
Practicing your best “poker face” is a good strategy to get yourself a good deal. Look uncomfortable in the situation and they will exploit this.
Issues not to talk about
- Do not praise the Japanese or show that you have a very good relationship with them
- Do not call Taiwan an independent state or country
- When you are in the presence of the natives of Beijing do not praise Shanghai and vice versa
Alliance Experts is present around the world with local people who know negotiation skills that can help you introduce you with potential agents or distributors in the right way and to the right deal. This way your business will more easily be successful.