It would be a mistake to assume that China is a straightforward or easy market to enter simply because of its huge population of 1.3 billion. But it’s not actually as simple as that. Below CEO Today benefits from expert insight from Dr. Johnny Hon, Chairman of The Global Group, on penetrating Chinese markets.
The Chinese market is a highly complex one for British investors to crack – and for good reason. For a start, it’s separated from Europe by geographical, language and cultural barriers.
However, the landscape has changed radically since I first started out as an angel investor, venture capitalist and entrepreneur. Thanks not least to technological developments and to an increasingly globalised economy, barriers to trade are steadily being lowered. My company, the Global Group, is built on the motto ‘Bridging the New Frontiers’ and one of our main goals is to encourage and facilitate positive China-UK relations.
Success in China is achievable if you conduct thorough research, gauge market interest, are prepared for the long haul and are sensitive towards the differences in business approaches and cultures between the East and West. With over two decades of experience supporting, advising and guiding investors, I know there’s a world of opportunity out there.
Do your research
China offers a vast, dynamic, rapidly changing and complex market, with some fascinating consumer trends emerging that are helping to open new and exciting opportunities for shrewd CEOs.
It’s important therefore that investors conduct due diligence and research the country, the market and the opportunity thoroughly. They will find a fast-growing middle class with increasingly discerning attitudes towards quality in all sectors, from retail and FMCG (fast moving consumer goods) to travel. This is closely related to the impact of globalisation, particularly amongst the younger generation, who are travelling more and experiencing other cultures first hand. The subsequent change in consumer behaviours is creating a Chinese market that is more internationalised and discerning than ever before. This creates more opportunities for foreign investors whilst also making them more challenging to pin down and follow through – particularly without the right market research and connections in place.
The research doesn’t have to start far afield; it can begin here in the UK. Businesses looking to enter the Chinese market might well consider testing any new offering in the UK prior to venturing further afield. If you can demonstrate that your concept works in the domestic market you will enhance your credibility and stand a much better chance of success abroad. Businesses should also ensure that their products or services are culturally sensitive and conform to all relevant laws and regulations in your target jurisdiction.
Once you feel you are ready, businesses can begin looking to Chinese markets to gauge possible demand. This can include analysing any competition, tracking consumer trends and identifying the best locations to pitch your offering. SME investors in particular may be well advised to look beyond the mega cities like Beijing, Shanghai, Guangzhou and Shenzhen, where competition is extremely fierce, and consider China’s wealth of second, third and even fourth tier cities, many of them with their own specialisms and all of them with great consumer demand.
Identifying the right partner
There are few foreign investors who begin with a deep understanding of the Chinese market, so if you can find the right business partner, you will stand a greater chance of cracking it. With more than twenty years of facilitating business relations, I can recommend Hong Kong as a great place to find partners. It is still rightly seen as a gateway to success on the mainland. By bringing a Hong Kong Chinese investment expert on board, British firms can leverage their extensive local knowledge and contacts. This is not necessarily limited to strictly business matters, but also applies to customs and cultural mores.
Foreign businessmen should not lose sight of the fact that Chinese culture is markedly different to western culture, something that can often be further magnified in the boardroom. A good understanding of business etiquette in the East is therefore an important asset. A knowledgeable partner will be able to advise on the behaviours and traits that are most valued, including courtesy and politeness.
There’s no time like the present for UK businesses
The UK has always had a strong entrepreneurial spirit and the ‘golden era’ of relations between the UK and China, originally forged by Prime Minister Cameron and Chancellor Osborne, was reiterated in February of this year by Prime Minister Theresa May, who sealed it with a handshake with President Xi Jinping.
Advances in automation and the development of Fintech, such as blockchain, are simplifying cross-border transactions and helping to circumvent language barriers. This has the effect of further facilitating mutual investment between East and West. At the Global Group, we bridge international frontiers and encourage our clients all over the world to consider their global investment opportunities. Cracking the Chinese market is eminently possible – but it requires hard work, diligent research and informed business counsel.