Overtaking the United States as the current richest country in 2021, the Chinese market has become an even more appealing and lucrative marketplace for corporatism and for expanding operations. For a foreign firm, however, it is notoriously challenging to enter China’s unique and consumer demanding market.
Here are our top tips to carefully consider and evaluate before entering the Chinese Market:
1. Identify the Market and Location
Exceeding a population of 1.4 billion people in 2021 and a larger landmass than the United States, China portrays itself as a huge potential market for manufacturing foreign goods and services. However, understanding where such opportunities arise from and how to access them presents itself as a challenge for Western firms.
Given the enormity of the Chinese marketplace, you should understand that China does not have a uniform and homogeneous market. With uneven rates of economic growth in different regions, it is more accurate to acknowledge China is comprised of a collection of individual sub-markets that are defined by the demographic population, income levels, geography, and cultural characteristics. Foreign firms should approach the market by segmenting the geographical parts of China to ultimately determine which location offers the best competitive advantage to target the diverse market in China.
Beijing, Shanghai, and Guangzhou, more collectively known as China’s first-tier cities, are the best locations with the lowest rick point of market entry to start for foreign companies seeking to expand their operations internationally. Nevertheless, first-tier cities do not come without their disadvantages. As tier-one cities in China have the most mature markets with regards to consumer behaviour, foreign companies are often subject to more competition and higher operational costs.
Second-tier cities such as Tianjin, Wuhan, Hangzhou have become more appealing for foreign companies. Thanks to the economic growth and rising income, there is an increased consumer purchasing power which creates extreme growth in demand for foreign manufactured products. Moreover, second-tier cities have lower operational costs compared to first-tier cities.
2. Carefully Evaluate Partners
Acquiring a Chinese agent, distributor or partner who can provide you with essential, reliable, and trustworthy local information and contact with Chinese consumers is pivotal for successfully entering China’s market.
Finding the correct partner requires due diligence, research, and patience. Depending on your ambitions to further expand into multiple regions, choosing the correct partner is crucial to ensure long term success. Agents and distributors tend to specialise in one region, whereas potential business partners are more heavily acquainted with specific sectors of an industry where they own private companies or enterprises established across multiple districts.
3. Understand Government Policies and Regulations
Although China’s trade environment has been liberalised after its entry to the World Trade Organisation, it is only to an extent as many industries to this day remain under stringent regulations. It is extremely critical to have a well-informed understanding of the government’s regulations and role in the Chinese economy, a foreign company will be able to successfully thrive in a heavily administered market.
Adequate research on the implications of certain regulations allows for you to understand how certain products or services are regulated and by which regulation agency. Whilst understanding is important it is also heavily emphasised to constantly monitor for any regulation changes in legislation and how they may impact your business.
Further consultation from Market research specialists and legal consultants may be required for foreign businesses to better understand China’s laws and regulations.
4. Utilise Local Platforms
According to statistics, around 970 million people use smartphones and on average, a user will spend 1.5 hours per day surfing the web. Ensuring a comprehensive digital mobile marketing strategy and platform for users to follow your products and updates is vital for generating a loyal consumer base. Obviously, the most cumbersome part is approaching advertisements in a Chinese specific way for communications, content, and engagement.
Censorship in China is strictly adhered to, there is no Twitter, YouTube, Instagram, or Google any Western platforms you can think of is most probably blocked. Instead, there is WeChat, XiaoHongShu (Red)，Baidu, Weibo, Taobao, all designed to uniquely cater to Chinese consumers. Comprehending how to appeal to the enormous Chinese consumer population utilising these apps is vital to ensuring long term success.
Weboost is a marketing expert, understand the digital platform Xiaohongshu, Douyin deeply, welcome to consult.
5. Develop an International Property Rights Strategy
Before entering the Chinese market, you should take appropriate protocols to protect your International Property Rights (IPR). IPR infringement is common in China, and you should be prepared that your technology may be compromised.
A highly effective IPR protection strategy for China will incorporate a combination of legal, practical, and technical measures that prevent any possible cases of infringement. Ultimately ensuring legal rights are enforced in the event of an infringement.
It is highly recommended to consult with specialised lawyers and conduct your own due diligence especially on prospective partners and company employees.