From a Western point of view, doing business in China is not an easy task. As one of the fastest-growing countries in the world, China is in constant evolution. Every day, big companies and smaller PME all around the world are trying to seize the opportunity of doing business in China. However, the Chinese market is tough and very competitive. Not only you will have to be innovative in order to distinguish yourself from your competitors, but also from Chinese companies that are more inclined to attract Chinese consumers.
Introduction: Foreign companies in China
In 1978, as Chinese President Deng Xiaoping focused on economic development, it multiplied by four the country’s output by 2000. Starting in the 1990s, China increased its participation in global organizations and assumed a prominent position in global political and economic activities. Since the introduction of the economic reforms in 1978, China has become the world’s manufacturing hub. Now, the Chinese economy has experienced astonishing growth in the last few decades that catapulted the country to become the world’s second-largest economy.
In 2018, the number of newly established foreign-invested enterprises in China reached 60 thousand. From 2010 to 2016, the number of annual registrations of foreign companies was relatively stable, varying between 23 thousand and 28 thousand. The preliminary figures from 2019 suggested that the registration number decreased to the level of 2017 again.
Economic cooperation with Chinese businesses should be a basic strategy for every company trying to gain a position in international markets. Presently China is, after the United States, the second-best location for foreign investment for many companies from around the world. It is an important and creative environment for a wide spectrum of business sectors. It should be noted though that for a foreign entrepreneur, China is still a new market, requiring greater knowledge and understanding. Constantly changing legal regulations and new developing business practices, as well as social pressure, are primarily associated with large disparities in terms of income between different groups and regions. Cultural differences are also not without significance.
1/ To do Business in China and adapt to the Chinese Market
One of the biggest misconceptions in companies is hopping into the Chinese market thinking there is no need for adaptation when transitioning their marketing plan from the Western market to the Chinese market. In truth, none of the techniques used in the past will be applicable to the China market. When targeting a new market, it is best to spend time in that area to get a full understanding of what people want.
You can do as much reading and online searches as you want but nothing will compare to experiencing the place in person. Many brands think lessons learned in the Western scene can be carried through to Chinese marketing, but that is not the case. The two markets have separate needs. The key to success is testing as early as possible with the least amount of financial resources and being quick to adapt to your learning.
Get to know your Chinese consumers
Chinese users come with all kinds of complexity, including their demographics, preferences, and cultural backgrounds. Online shopping for them is more of a social experience, rather than a mission-driven thing as in the West. They tend to collect information from multiple sources and compare their options thoroughly before making purchase decisions, and they are willing to share their shopping experience and advice as well. Leveraging their online social circle will help you to reach more potential consumers.
The example of KFC (肯德基)
The key to KFC’s success in China has been its aggressive catering to Chinese tastes, with menu items that you will never find anywhere else in the world.
With this strategy, the brand is tapping into the traffic to firstly register members to its loyalty app, and also to sell gift cards and coupons – described as their way to “build a new O2O (online-to-offline) model” – using digital techniques to drive store visits. And the results were “beyond….expectations”.
KFC in China usually adapts its advertising campaigns to match the Chinese customers’ tastes. And, in order to maximize their digital distribution channels, KFC China has opened a digital store on TMall – the Chinese eCommerce marketplace operated by Alibaba, which is the world’s 9th most visited website. To put it simply, KFC was able to attract Chinese consumers thanks to their digitalization, but also because they were able to adapt their brand to the Chinese market.
Read: Guide to Content Localization for China
2/ Define a clear strategy before entering the Chinese market
Understanding the Chinese market
So, in order to enter a large and complex market like the Chinese one, you will need a deep understanding of its business landscape, consumers, marketing channels, and culture, which are different from the West and have been changing rapidly over the years. You should operate in environments that are suitable to your needs, and your brand must be flexible for the Chinese market.
Moreover, focusing on China’s Tier 1 cities may not be the right step in successful marketing. Other companies have already made an impact there and competition is only tougher. Focusing on smaller cities can be a smart move because there is less competition but still a couple of million people in the population.
Before doing business in China, conduct a Market research
Entering the Chinese market is no easy task! Make sure to do plenty of research before stepping into the market. Due to the fact that China’s economic growth soared in the last few decades, the competition between companies is tenser than before.
We highly recommend you do market research based on the following topics:
- Evaluate the characteristics of different markets and customer segments
- Review different industry clusters in first- and second-tier cities
- You have to understand the regulatory environment which can be different in each province
- Analyze your competitors, especially in terms of price, positioning, and services
Leverage Chinese platforms
The local platforms are developed to cater to only Chinese consumers and provide powerful infrastructure and marketing solutions for tapping into huge active online communities.
3/ When doing Business in China: Be responsive
Don’t forget that the Chinese market is constantly and quickly evolving, so you will have to follow at the same pace. For example, you will have to pay attention to the online experience as Chinese consumers’ behaviors are being digitalized and mobilized. You need to ensure that your consumers will have a seamless experience on your website and app. Moreover, don’t forget that you will have to be prepared and react quickly against your competitors.
4/ Team up with locals
Teaming up with local companies or officials can help foreign companies maneuver the ins and outs of the Chinese market. For example, Airbnb worked with a number of Chinese city governments to pursue common goals, such as increasing tourism and training local businesses, which has resulted in Memorandums of Understanding between Airbnb officials and mayors of Guangzhou, Shanghai, Chongqing, and Shenzhen.
5/ Mandarin Chinese: A Key For Doing Business in China
Cultural misunderstandings leading to miscommunication are one of the biggest challenges that foreign companies have to face in China. In fact, if you want to do business in China, it is essential for you to hire someone who understands the subtleties of the Chinese language and culture. It is also appreciated if you are able to say a few words in Mandarin Chinese to show your associates that you are motivated and interested in Chinese culture.
Moreover, in terms of culture, China is completely different from western countries as Chinese people are extremely sensitive. So, it is crucial for you to build a marketing strategy according to the language’s complexity and the difference in terms of interpretation from one language to another.
For example, a French automobile company brand named Biaozhi is closed to the Chinese word “Biaozi” (which means “bitch” in Chinese). Shang Xia (Chinese brand of Hermes) means “to have the heart that goes up comes down” “feel dizzy”.
So, be extremely careful when translating to Chinese as it can have a totally different meaning than expected and that’s why you should hire a professional translator.
6/ Obvious but…use Chinese Social Media
Instead of Facebook or Twitter, Chinese people are using Weibo and WeChat. Sina Weibo is one of the most popular sites in China with a similar penetration as Twitter.
WeChat is the most frequently used social networking platform in China, providing multimedia communication with both text and voice messaging. With WeChat, companies are able to have one-to-one communication with their clients by establishing a WeChat store and creating integrated campaigns on mini-programs for example.
Find out about China Top 10 Social Media
7/ ‘Guanxi’ (关系): A Major Key for Business in China
Relationships with employees, suppliers, customers, and associates are essential for you in China. Chinese people are more sensitive to interpersonal relationships than Westerners.
Don’t be surprised if your future associates want to have a few drinks with you, you will be able to talk more casually about business, and they will be more open to discussing with you.
8/ Focus your strategy online
Most of the time, Chinese consumers go on the Internet through their smartphones. According to China Internet Network Information Center’s (CNNIC) latest report, there are 649 Million internet users in China, and 85% of them access through their mobile phone (+ 11% year over years). A lot of companies are trying to get a piece of the Chinese market pie. However, as we have already seen, marketing in China is quite different from marketing in Western countries.
However, you have to be careful because the online shopping environment in China is very different from any other country in the world. If you want to do e-commerce, JD.com and TMall (platforms where many brands are available in the same place) are more popular and efficient than starting your own eCommerce website. According to Alibaba, 54% of all online shoppers use TMall. As a B2C platform fully dedicated to brands, TMall has attracted many western retailers as an effective marketing platform to speed up sales besides their own website.
9/ Business in China need Online Communication
Today, almost every Chinese social media site has created a mobile app to give its users instant and real-time access from their devices.
On Chinese social media, influencers – called KOLs (Key Opinion Leaders) – have massive clout, and you can get a lot of exposure through them at a reasonable price.
10/ To do business in China, Be patient & flexible
Chinese people are considered very flexible, they accept everything the customer wants or almost. Chinese SMEs are often “customer-oriented” and have great flexibility.
Lastly, don’t forget that overnight success in China is impossible. You will have to wait a few years in order to establish your company completely in China and attract Chinese consumers.
Read about the Top Mistakes Made by Foreign Business in China
We help your business thrive in China
Over the years, we were able to enhance our services and strategies in the Chinese market. We have had multiple experiences in a diversity of fields, as well as many successful collaborations. However, all companies are different and require a specific approach. So, do not hesitate to contact us so that we can discuss your projects to give you the solutions that you will need.
The current shortage of semiconductors in the world has highlighted their importance in key economic sectors such as information technology or automotive. Car production plants must temporarily suspend their machining while waiting for the next delivery of semiconductors. Today, most semiconductor design is done by American companies, and the rest of the production takes place in Asia before the finished chips are shipped around the world.
This industry has not escaped the rise of the Sino-American rivalry or what some have called the tech war between Washington and Beijing. Under the Trump administration, a series of measures have been taken to limit China’s access to American semiconductor design technology, particularly those that are 7 nanometers (nm), 5 and soon to be 2 nanometers. These latest generation semiconductors are designed only in the United States. Their advantage is that they are smaller and more efficient in terms of information transmission speed. They enter into the manufacture of high-tech products from major brands such as Alibaba or Apple. And above all, they will be increasingly necessary to enable the development of 5G communication networks and cloud computing.
The American strategy that we are going to decipher here took place in several stages starting in 2018. It began with a public diplomatic campaign against a Chinese company, Huawei, then moved on to the implementation of internal regulations limiting the access of Chinese companies to American latest-generation (7nm and sub-7nm) semiconductor technology. At the same time, the US administration carried out a complete overhaul of the control system for semiconductor exports to China. Consequences of these various measures: more restricted access for China to microprocessor technology, whether sold directly to China or through production carried out in third countries using American technology. This last scenario then falls within the framework of the application of the principle of extraterritoriality of American law [i], a tool used as a weapon in the technological war against China. These actions of the Trump administration and then the Biden administration, whatever their form, are partly explained by the practices of intellectual property theft carried out by Chinese actors. These practices and the associated shortfall have affected the entire US semiconductor industry. Qualcomm, Intel or Micron have suffered the effects.
In May 2019, the Bureau for Industry and Security (BIS) [ii] of the United States Department of Commerce decided to place the Chinese telecommunications equipment production company Huawei on an “Entity list”. Once on this list, US exporters who worked with Huawei had to obtain a special export license. In the eyes of the US administration, Huawei at that time violated the financial sanctions applied by the United States to Iran [iii]. Google’s export of Android software to Huawei was stopped by this measure and Huawei could no longer market phones with Android software and updates. The Chinese company had to speed up the development of its own software for its smartphones.
A year later in May 2020, the same Bureau for Industry and Security (BIS) of the Department of Commerce announced that export licenses would now be requested for the sale of the design part of microprocessors. This new technology, which particularly concerns 7-nanometer microprocessors, includes a share of American intellectual property since it has given rise to the filing of new patents. This US regulation has created uncertainty around Huawei. The company could no longer guarantee the sale of smartphones and telecommunications equipment (5G) containing American technology microprocessors. This could slow down its production and harm its competitiveness. Moreover, these settlements have highlighted Huawei’s reliance on American technology.
This is an awesome article!
This article is all about the top 10 rules for doing business in China.
I learn lots of new things from the above blog.
Thanks a lot.
These 1à rules are really great.
Amazing to discover this website full of useful resource about business in China
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Is all this still relevant in 2020?
One of the issues that I have been facing lately is whether or not to return to China for work. I have taught ESL in China before, but I am pursuing a business route now. I am finishing up a graduate business degree program and I already have a degree in Chinese. I am wondering if it would be worthwhile to return to China to work in business, possibly with a focus in interpreting? If so, what would be the best avenue to pursue job openings in this Thanks.
I really like your pic, so true and 100% accurate.
Everything is possible in China, but nothing is easy…
WeChat is your email box yes …
Never assume anything but accept there is much you do not comprehend, and Americans (that’s me) leave your “Cowboy Attitude” at home. Dig, dig and then dig again for the truth and remember what Mark Twain purportedly said “Confidence, it’s that feeling you get before you understand the situation” … so true in China
Everything in the 12 rules are indeed very true. Patient and persistence will take care of many of them. Respect and “face” value are quite delicate and take time to learn and adapt well to.
But….rule No.1 should be “don’t trust anyone”.
If I may add one more….Ok to share what you know-how to build the trust and get more business, but always keep yourselves 2-year ahead of your competition so you do not feel bad if your know-how is being “learnt, mastered, and improved” by the smart hard-working Chinese.
Do you have an updated article about Doing Business in China on your Websit ?
Yes we have this one 2018 https://marketingtochina.com/13-western-habits-give-successful-china/
Nice post. Happy that I came to know the rules for doing business in China through this post. China is the business hub of the world and its the dream for many entrepreneur.
Can’t agree more.
Very Nice Post. 100% agree, specially be patient !