Understand the risk of entering China market

On August 29th, 2011, posted in: Company Blog by Comments Off

China market is indeed a growing pool of investments, trade and production. Many have termed China as the world’s factory where lots and companies around the world are entering into China to further expand their business. As China continues to progress in recent years, many foreign companies in China are benefiting as well. Today, China has attracted the most number of foreign investors compared to other developing countries.
China is a good opportunity for companies to embark on if they want to expand their business in Asia and the world around. However, SMEs (small and medium enterprises) may be worried that they do not have the required or enough resources to enter into China market. However, it is not just about having the capital but applying the correct approach when doing business in China.
China market is a complicated field by which only those who are familiar with the Chinese culture would be able to move around in the market. Many may not realize that China is a country whereby the Chinese are deal with business according to their social and cultural values.
The Chinese have been passing down a set of values since history and the Chinese companies have been carrying out their business and trade according to those values and beliefs. Thus it takes more than just being able to speak the language.
To survive in the China market, one must have good relationships in the market. The Chinese uses the term, “guan xi” to refer to any kind of relationships; personally or bureaucratically. Chinese companies tend to want to work with people whom they are familiar with as they would be able to develop a trust between them.
Furthermore with “guan xi”, newly established companies would know the knitty gritty paperwork and having a good relationship with the government officials would reduce any unnecessary procedures and delays.
However, a number of foreign companies do not a good network in China and thus they are unable to find relevant or reliable business partners in China market and meet a lot bureaucratic problems as they are unfamiliar with the laws of China.
The Chinese consumers have a very strong national pride and they like to be associated with their nationality and country. Hence, the Chinese consumers are very supportive of their local products. Hence, foreign investors sometimes have a hard time trying to market their products to the Chinese consumers because their products may seem too unfamiliar and foreign.
Foreign companies need to familiarize themselves with the China market laws and culture before entering it. The China laws may be frustrating as they seem to be very complicated. However, if foreign companies are familiar with the Chinese culture, they will be able to understand the Chinese laws better. Interacting with the locals would also allow a deeper understanding of the Chinese culture. Hence, a lot of foreign companies would undertake a local company as a partner to help them with the registration process and negotiation with the Chinese.
In addition, most of the foreigners are not exposed to the Chinese culture, thus they do not know what are the preferences and needs of the Chinese consumers. Carrying out a consumer research may not be very useful as the information collected may not truly reflect the true responses as the Chinese may not be comfortable giving out information to foreign researches. Hence, very often, foreign companies engage a local research company to carry out market analysis research as the data collected may be more reliable.