While "The Great Firewall of China" may sound intimidating for many foreigners looking to expand their business, this should serve as a challenge rather than a setback. It is an exciting venture for your business to open up in China, and you can be successful if you learn to understand and work within their culture.
To help businesses decide whether or not they should expand their business in China, we've come up with this quick guide to help you understand the Chinese market.
Why Do Business in China?
Expanding your business in china has numerous benefits and advantages, especially for small to medium-size businesses or even for start-ups.
The most obvious reason why many foreign businesses are interested in China is its size and rapidly growing economy. With over 1.4 billion in population and 971 internet users in the country, this provides opportunities for businesses to sell their products and services to a larger market.
Also, China is a major trade hub. China's membership in the World Trade Organization (WTO) has helped create a more favorable environment for foreign businesses. Since China joined the WTO in 2001, the Chinese government has made several reforms making it easier for foreign businesses to operate.
In terms of digital marketing, China presents a unique opportunity. While Google is blocked in China, there are several other popular search engines and social media platforms your business can use to reach your target market.
For example, Baidu is the largest search engine in China, with over 80% market share. WeChat, a messaging app with over 1 billion monthly active users, is also a popular platform for businesses to connect with potential customers. These platforms should be on your radar if you're looking to market your foreign business.
Ecommerce businesses can benefit from China's growing middle class. According to a report by McKinsey, China is expected to have 630 million middle-class consumers by 2022. This presents a significant opportunity for businesses looking to sell their products online.
In fact, China has been the largest online retail market in the world since 2013. In 2020, online retail sales revenue reached CNY 11.76 trillion ($1.81 trillion), which was an increase of 10.9 % compared to 2019.
The Three Major Factors for doing Business in China: Market Size, Culture, and Regulation
When considering doing business in China, you must consider three important factors: market size, culture, and regulation.
China's size appears to be the most appealing factor for firms entering this market. However, most businesses are unaware that China has a more diverse demographic profile, consumer preferences, and selling possibilities with a population this large. Moreover, a marketing strategy designed for one region may be ineffective in another because foreign businesses do not comprehend the country's cultural norms.
While the United States is almost the same size as China, Americans are accustomed to similar sales and marketing platforms. In addition, local companies can appeal to the same American demographic audience on both East and West Coast since the nation's wealth is dispersed, and the economic activity is relatively uniform. This is not the case in China.
China's culture and lifestyle differ so much from region to region, consumer preferences are not as uniform.
Understand and Embrace Cultural Differences
When it comes to work, people in business interact at a more personal level compared to the West. For example, Chinese employees prefer spending time with you to get to know you as a person and may share some stories about their private lives.
This is in contrast to the more formal and reserved interactions in the West where employees tend to separate their professional and personal lives.
If you are doing business in China, be prepared to spend time getting to know your employees and colleagues on a personal level. This will help build trust and rapport, which are essential for doing business in China.
The Chinese government has also been cracking down on foreign businesses operating in the country. There was a more relaxed attitude towards regulation and compliance in the past. However, this has changed in recent years as the government looks to tighten its grip on the economy.
This created a more challenging environment for foreign businesses, who must be up to date with the latest regulatory changes.
Stay Up to Date With Regulatory Changes
Doing business in China is not for the faint of heart. It's a complex and challenging market, but it can be very rewarding for businesses that can navigate it successfully.
There are several regulations businesses should make themselves aware of before conducting business in China. For example, for e-commerce companies, the PRC E-commerce Law is one you should take time to learn about.
On August 31, 2018, the PRC E-commerce Law was passed by the Standing Committee of the National People's Congress and took effect on January 1, 2019. It is the primary legal basis for governing online business activities in the People's Republic of China (PRC).
E-commerce companies must also comply with a range of other laws and regulations, such as the Cybersecurity Law, the Advertising Law, the Consumer Protection Law, and the Anti-Unfair Competition Law.
Growing Industries in China
The following industries are growing rapidly in China and present opportunities for foreign businesses:
| Industry | 2022-2023 Revenue Growth |
|---|---|
| Cafes, Bars & Other Drinking Establishments in China | 22.0% |
| Online Shopping in China | 17.4% |
| Medical Device Manufacturing in China | 16.5% |
| Mail-Order & Online Shopping in China | 16.3% |
| Couriers in China | 16.0% |
| Alternative-Fuel Car & Automobile Manufacturing in China | 16.0% |
| Internet Services in China | 14.8% |
| Hotels in China | 14.7% |
| Pig Farming in China | 14.6% |
| Energy-Efficiency Consultants in China | 14.6% |
How to Increase Your Chances of Success in China
If you're thinking of doing business in China, there are a few things you can do to increase your chances of success:
- Be Ready to Adapt to a New Culture
As mentioned earlier, China is a very different place from what most Westerners are used to. So be prepared to embrace the differences and adapt to the local culture. This includes everything from how you dress and speak to how you conduct business deals.
Although many people in China speak English, it's still essential to make an effort to learn some Mandarin. This will help you build strong business relationships and showing that you're serious about doing business in China.
- Create a Comprehensive Strategy in Digital Marketing