Guide

An insider's guide to operating in China

Simon Bevan Simon Bevan

When it comes to international expansion, what holds many businesses back is a lack of knowledge about foreign markets and a shortage of time to conduct research.

Here, we outline some of the key challenges and opportunities when doing business in China.

Rich potential for mid-market growth in China

The opportunities for UK companies seeking to do business in China are well documented. In 2017, trade between the two countries reached record highs, exports from the UK to China have tripled since 2008 and UK investment into China has more than doubled in five years1. The mid-market in China also represents a growing opportunity. This market segment is growing faster than the overall economy and economic optimism is high, making it very attractive to UK businesses.

Our 'Insider's guide to operating in China' is designed to support businesses looking to grow into China with hard-won insights from experienced market specialists. It draws on knowledge amassed from years of experience doing business in China, from the perspective of specialists from Grant Thornton both in the UK and in China. It is a pocket guide to business strategies for success, offering business basics for China, some dos and don'ts and many more useful insights that can only be gained from first-hand experience.

By way of a taster, here are five tried and tested business strategy tips for success in China:

1 Tackle the market in bite size chunks – China has 1.4 billion people, hundreds of dialects and 34 provincial level administrative units. You can't access the entire market in one go. British companies have generally focused on the first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen. However, as these markets are maturing and competition from overseas players is intensifying, it may be worth considering faster growing, lower tier cities where competition is less fierce, or targeting city clusters, which is something the Chinese government is actively developing. The biggest of these clusters can be found around Beijing, Shanghai and the Pearl River Delta.

2 Have a long-term horizon – it's costly to set up in China. It takes time to find and form partnerships, get the necessary regulatory approvals and navigate the tax environment. This means that returns generally take longer than expected, so plan for the long term and set up accordingly.

3 Go where the customers are – some companies simply follow key clients from their domestic market into China. If this isn't you, then you'll need to find a suitable geographic market where prospects are concentrated. Using an experienced market adviser can help you identify the areas that might be a natural fit, for example the financial centre of Shanghai for fintech or Guangdong for manufacturing.

4 Localise to the market – successful localisation is vital to success and this means finding the right local partner. Consider languages, experience, ways of working and industry networks when scouting partners and realise that your choice is likely to influence how you structure operations in China. Recognise that there will be limits to the local knowledge that any one partner will have.

5 Find a good interpreter – in China there is a specific nuance to what is said and what is meant. Building strong relationships and trust with partners helps but a good interpreter, who has been fully briefed on the objectives of any meeting, will help you navigate business conversations to ensure you truly understand what goes on and that you fully communicate your requirements.

For further insight into doing business in China, request to download our insider's guide to operating in China.

References

  1. UK Balance of Payments, The Pink Book: 2018, Office for National Statistics, 2018

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