great wall china

Doing business with China – what do you need to know?

It’s the second biggest economy in the world and continues to grow at a staggering rate. The number of middle-class consumers in China alone is predicted to more than treble to 480 million by 2030. UK-China trade is on the increase too having increased 2.5 times in the past 10 years and worth around £60bn annually. With these statistics, it’s unsurprising that in the wake of Brexit, many companies are turning their attention to the east and what it has to offer.

But with huge cultural and structural differences to western countries, there is a lot to consider before making the step. Large parts of the economy are still closed to full foreign participation and there is strong competition from well-resourced, state owned companies. Add to that a complex business culture that needs careful negotiating. But that’s not to say it’s not worth the effort. Mark Hedley, advisor at the China Britain Business Council (CBBC), said: “For any UK company, it is important to realise that China is different – not impossible.”

So, what are the key tips for those looking to make a success of doing business in this vast country?

Focus on quality and your goals

The UK has the kinds of products and services that Chinese consumers crave – in education, healthcare, professional services, creative and innovative design and advanced engineering. According to the Department for International Trade, China is set to become the world’s largest luxury goods market by 2020.

Mark Hedley, of CBBC, said firms should avoid the low cost/high volume market. “Differentiate yourself on your unique selling proposition, quality and know-how. It’s also important to be flexible and localise your products or services quickly,” he said.

Business culture

Chinese business culture must be embraced by foreign companies looking for success. This means building relationships, showing respect and avoiding conflict. Jason Keiles, co-founder and managing director of Atonik Digital, a UK-based advisory firm that supports companies entering emerging markets says: “The Chinese want to make sure they understand who they are getting into business with. It is much more about the courtship. Getting to know one another and socialising comes as part of that.”

Jason said UK companies needed to be prepared for the fact that deals would not happen overnight, adding it was about developing a firm and trusted network. “It’s all about finding the right partners who can help you navigate the market,” he said.

Intellectual property

This is often a challenging issue in China and companies must be clear on how they protect their IP when they enter the Chinese market, as well as monitoring for possible infringements. Trademarks, designs and patents must be registered before you begin. Jason, of Atonik Digital, said: “China has evolved a lot, but it’s very important you employ an IP lawyer to help protect you and navigate any pitfalls and challenges you might face.”

Knowledge is key

The country poses huge opportunities if you are prepared to invest time in detailed research. Jason Curtis, commercial director at trade credit insurer Atradius said taking time to understand target customers is vital. “An example of not getting it quite right is illustrated by the experience of a British cheese manufacturer that thought China was an easy ‘target’ as a potential new market,” he said. “They had correctly identified that the cheese market in China offered significant growth opportunity.

“However, the commercial sophistication of the highly developed east coast are yet to reach more central provinces; so, when the British company selected a food fayre in Guilin to launch its product, it did not appreciate that in the less developed, more traditional areas, the culture and ‘taste’ is very different.

“To the traditional Chinese palate, the taste and smell of European style cheese can be distasteful: our British Manufacturer could not persuade Guilin trade delegates to venture anywhere near their cheese stand. The sample produce which was carefully – and expensively – shipped to central China went to waste.”

How will you establish yourself in China?

When it comes to the law, any full-time staff hired in China, need to be employed by a Chinese entity. Avi Nagel, advisor for the CBBC explained: “The corporate requirements for setting up companies in China, paying taxes and repatriating profits are complex and often change. Setting up a Chinese subsidiary of your UK company can take up to 12 months and requires a registered Chinese office address and Chinese business plan. To repatriate profits to the UK, foreign companies will typically have to allocate 10% post-tax income to a local reserve fund.”

He added this was not necessary if a business planned to sell goods from overseas. “While the requirements may appear complicated, there are a number of law and accounting firms, with experience of working with British companies in China who can offer advice”, he said.

Overcoming bureaucracy and regulations

Setting up a bank account can be complicated and businesses should take advice on the best approach.

The internet is strictly regulated in China, so great care needs to be taken. Alex Nam is Managing Director of global content delivery organisation CDNetworks EMEA, which helps businesses keep websites accessible around the world.

He said: “Getting this wrong means the website will be blacklisted and blocked, with no appeal. Strict rules about content need to be obeyed, the right licenses need to be obtained, and the website needs to load quickly. Chinese users are just as demanding as those in North America or Europe and will browse elsewhere if a website takes too long to load.

“Working with a specialist partner with local presence to overcome these issues is a must – it’s not a task a business can hope to achieve on its own.”

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Miles Hobson

Miles Hobson

Miles oversees marketing communications at FairFX. He has a passion for travel and loves to explore new cities on foot to find their hidden gems.

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