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How To Break Into The Chinese Market

China's burgeoning middle class, willingness to buy online and love of British brands makes it an obvious market to target.

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China's burgeoning middle class, willingness to buy online and love of British brands makes it an obvious market to target.

Guides

How To Break Into The Chinese Market

China's burgeoning middle class, willingness to buy online and love of British brands makes it an obvious market to target.

Share this article

Over the past decade, China has become a veritable economic powerhouse. Although factory construction and manufacturing may be slowing, consumerism and the services sector in China is growing exponentially to meet the needs of the country’s emerging affluent middle class.

As an indication of the strength of China’s services sector, in 2015, services generated more than half of China’s gross domestic product for the first time.

As the services industry blossoms in China, there are huge opportunities for UK entrepreneurs and SMEs to break into the Chinese market. The lucrative Chinese market has helped to launch and grow hundreds of UK businesses and, despite the current widespread media debate around the state of its economy, UK entrepreneurs can absolutely still make it in China.

To increase the chance of successfully making it in the expansive Chinese market, here are the most important factors I think all British entrepreneurs should know before trying to establish themselves in the market.

Make sure your business is appealing to the Chinese market

As China’s economy transitions into one focused mainly on domestic consumerism, there are particularly pertinent opportunities for SMEs with strong brands, new technology and a comprehensive understanding of Chinese culture.

China’s e-commerce sector is booming. Last year alone, Chinese consumers purchased 3.877 trillion yuan ($589.61 billion) worth of goods online. Furthermore, despite low incomes, consumers in small and mid-sized cities spent almost as much online as those in larger, more prosperous cities.

Chinese ecommerce

The Chinese are no strangers to buying online

So, if your business is consumer-facing, it is well worth investing in proper e-commerce capabilities so that you can easily access the lucrative Chinese online market.

Equally, small media companies, especially those in entertainment and technology, are extremely well placed to benefit from Chinese investment or potential joint ventures in the Chinese market.

China is set to become the largest entertainment market globally in 2017 and domestic conglomerates are constantly looking to work with or invest in UK SMEs that can offer something novel to their market, whether through creative services, technology or consultancy.

Take advantage of positive Sino-British trade relations

Although it is well known that Britain and China have very positive trade links, many entrepreneurs are not aware of the various UK networking organisations that exist to assist UK entrepreneurs and SMEs to access the Chinese market and investment.

Foremost among these groups are the China Britain Business Council (CBBC) and the 48 Group Club, who have excellent contacts and decades of experience in this area. They can provide entrepreneurs with the knowledge and connections needed to take those first steps to break into the Chinese market.

In addition to prominent networking groups, there are various other initiatives designed to help British businesses break into China through e-commerce.

For example, Royal Mail has its own online shop front on Alibaba’s Tmall Global e-marketplace selling British products to China’s expansive demographic of online shoppers. This may a good place for a British entrepreneur to test the waters before diving into the marketplace.

Burberry

Many British brands are doing well in China, especially at the luxury end of the market

Take the time to understand China’s unique business culture

The UK and Chinese markets are complementary, but vastly different. This applies to both customers and investors. So, it is hugely important for UK entrepreneurs not to rush into China and to learn as much as possible about the market.

I would recommend travelling to China as much as possible to learn about the culture and the unique way of conducting business.

If possible, travel further afield than the major cities. The biggest business opportunities are in the fast-growing second and third tier cities. Alternatively, try to break into the Hong Kong market first. Hong Kong’s history with the UK means that it can help ease the transition from the UK to the Chinese market.

When spending time in China or Hong Kong, seek out the opportunities that will allow UK SMEs to partner with existing Chinese ventures, such as those supporting China’s Belt and Road Initiative. Establishing a strategic partnership is the easiest way to initially enter the market.

Know the risks

In addition to getting to know the Chinese culture and business customs, it’s important for entrepreneurs to prepare themselves and their business for the sheer size and demands of the Chinese market.

China has 14 cities that house over 5 million inhabitants and a total population of over 1.3 billion. As such, it is important not to underestimate how difficult can be to crack the market. This said, with perseverance, it could turn out to be the best business decision you make as an entrepreneur.

The future is looking bright

Despite some of what is said in the media, there will continue to be ample opportunities for British business in China in 2017. As the Belt and Road Initiative develops, there will be many opportunities for UK SMEs to partner with Chinese business in third markets.

E-commerce is only set to increase in popularity across China and UK SMEs with a strong online presence should take advantage of this. There will also be more Chinese businesspeople seeking to expand into the international markets, creating even more opportunities for Chinese investment in UK SMEs.

Dr Johnny Hon is an Anglo-Chinese entrepreneur, investor and philanthropist. He is founder of Global Group and executive chairman of Gate Ventures.

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How To Break Into The Chinese Market

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