12 Jan 2024

Doing Business in China

The worldwide perspective shows that China presents an array of business possibilities and opportunities for growth. Many brands do not know how to penetrate the market successfully and stay relevant amongst the Chinese consumers. They lack the understanding of the consumer behaviors, what they would typically engage in, or what tools are available for the brands. 
This article will look into the ins and outs of how a brand could successfully do business in China. The country’s economy is massive and complex. It is continuously growing and evolving. Therefore, for foreign brands looking to dive into the market, there needs to be an understanding of the current situation and the ability to predict where China’s future economy will be heading. 
These are the key factors, to name a few of the ever-evolving country and its economy.
  • Since the 2008 economic crisis, China has been the most significant single contributor to the world’s economic growth. Although it may have been stagnant in recent years, the economy is still proving to perform well compared to its mature western counterparts. In 2018, the final quarter showed a growth of 6.4% compared to previous years. 
  • it is expected that by 2030, China’s GDP will overtake the United States of America. 
  • Trillions of dollars have been invested by the government into the country’s infrastructure to ensure that the economy grows. As businesses thrive, so does the country’s consumers’ wealth. Various cities have upgraded new subway lines, and the easing of monetary policy has been designed to ensure there is plenty of money in the financial systems. Furthermore, the government has pledged to cut taxes, ensuring further riches to Chinese consumers’ enabling increased purchasing power. 
  • Local housing was never initially backed by the Chinese government and is typically used as a ‘last resort.’ However, the government does have access to the lever. It is good to know if a brand would need to pull it any time in the future.
  • The sophistication of the Chinese consumers is very much like the West, and they expect companies to continue to provide value. Domestic and foreign brands are expected to bring innovative solutions to price, product and address external factors such as sustainability and much more
  • By 2025, China’s population is expected to grow exponentially to host up to 350 million people. Big enough for ten cities much the same as the size of New York.
  • The Chinese disposable income per capita and consumption per capita grew by 6.5% and 6.2%. China is achieving its twin goals of doubling its gross domestic product (GDP) by 2020. 
  • China surpassed Europe as the world’s largest beer market, and beer drinking has been growing fast in the country at 10% a year. In terms of quality and taste, foreign brands are preferred over local brands. 
  • The country is also the 6th largest wine producer, and it is striving to be the world’s top producer by 2058.
  • The country’s major commodity lies in cement, iron ore, and coal. China consumes 53% of the world’s cement, 48% of the world’s iron ore, and 47% of the world’s coal. 
Before entering the Chinese e-commerce market space, foreign brands need to understand who their Chinese consumers are. The country’s consumers differ significantly from those of the West in many ways. For example, Chinese consumers are incredibly tech-savvy, detail-oriented, and relishes in compile-first capabilities; these are just the primary behaviors. But to successfully penetrate the market, there are many other factors that brands need to understand. Geography, seasonality, age groups, gender, and technology.

In addition, there are other factors about the Chinese consumers that many foreign brands may not know: 

  • Tmall users are 60% females
  • JD.com is more attractive to male users
  • Product information is more important than the story behind the brand.

Besides the points mentioned above in understanding the Chinese consumers, any foreign brand looking at entering the Chinese market must also be informed of the relevant legal and administrative components to know where the brand fits within the market. 

 

Trademark

Trademark
Trademarking laws in China are cheap; brands should know that the first to file with the China Trade Mark Office has the right to sell goods under that trademark. Therefore, doing a comprehensive trademark search will ensure that a brand is the first to file. 

It is also critical for brands to ensure that there is a market for the product or service offered. It is often where foreign brands fail to understand the Chinese market and thus have had to pull out. Brands need to perform data analysis on competitors’ sales to understand the overall revenue. The demand in the market will help clarify any brand’s entry and growth strategy without spending time or money. 

The Great Firewall

First and foremost, China’s technological landscape – The Great Firewall precludes the use of popular business tools and systems that includes Google Suite, Salesforce, and automation tools such as Marketo and Eloqua. There are also numerous complex policies regarding logistics, shipping, and taxes which are confusing for many foreign brands trying to enter the market. 
The Chinese Great Firewall is the virtual barrier between the country’s domestic internet and the rest of the world. The massive implications of the “Great Firewall” have caused great strife for many western brands looking to do business in the country. Brands need to adapt to this to succeed and drive growth.
Western companies’ dependency on analytical tools like Google Analytics, Google Ads, and YouTube changes their approach to how they market themselves to their audiences. However, plenty of Chinese-made tools replace the functionalities and benefits of those not allowed inside the ‘Great Firewall.’ 

Although it is likely to rely on alternatives and virtual private networks (VPNs) to work around the ‘Great Firewall.’ The country’s Ministry of Information is consistently finding ways to close that loophole. But, unfortunately, the use of these temporary solutions is unreliable and unprotected (subject to data breach). 

With this growing frustration, Chinese businesses have recognized the need for a web analytic tool approved within the Great Firewall. Baidu and Tongji are a few developed programs used to fill the void. Baidu is China’s search leader, otherwise the Google of China. However, Tongji lacks security control as there have been reports in the past that this program has been used to weaponize viruses and spyware. 
China needs to be treated as an exception and not the norm to its Western counterparts. Local businesses have designed their online interfaces that align with the unique technological requirements inside the wall. Brands who wish to have an effective presence in the country must modify their design, layout, and code optimized for their niche. 
Chinalytics is the one solution that has proven effective around regulations from China’s Ministry of Information. Chinalytics provides users with customizations and safety of information needed to continue normal analytics processes.
Protecting a brand from a potential breach of data is very different in China than in the West. According to the People’s Republic of China’s Cybersecurity Law, personal information collected must be stored within China’s borders. Should companies fail to comply with laws, they are heavily fined and will have their business licenses revoked. Therefore, to ensure that a business’s data is protected and maintained in China, companies must:
  • Work with a local service provider that doesn’t share data with third parties. AWS Amazon Web Services is a prime example.
  • Make sure that the brands’ cloud-based data is encrypted. The country’s encryption falls within the Office of State Commercial Cryptography Administration (OSCCA); OSCCA-approved products can only be used in China. Brands will require clearance before applying.
  • Use of cryptography.
It is advised that companies consider investing the time and money required to secure their data before entering China.
China Lytics

Thank you for exploring our content. We aim to provide valuable insights into the Chinese market to aid your decision-making and support your business at every step.

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