Doing Business in China: 3 Considerations for Success

As the second largest economy in the world, China remains an extremely attractive market for foreign companies.  However, doing business in China can be challenging.  Rapid market transformation and new government reforms can make China a very difficult market to access.  If you want to succeed in China, here are three key points to consider.

Policies and Regulations

Government policy can jeopardize business success.  What was once a viable project may be tipped into bankruptcy by a sudden tax increase or new regulation.  China is a heavily regulated country, and policies and regulations can be very complex.  Likewise, rules and restrictions on foreign business have become more stringent in order to strengthen the competitive positions of domestic companies.

To succeed in China, it is important that you spend time understanding the regulatory environment.  For example, what licenses and permits are required to do business in china?  What is the process and time frame for obtaining such licenses and permits?  How will you protect your intellectual property under Chinese law?  It’s also good practice to anticipate change beforehand.  In order to anticipate such changes, you should establish an accurate source of information, namely an unbiased individual or organization who is able to alert you of changes ahead and enable you to plan effectively.

Distribution Landscape

The distribution landscape in China has gone through major transformation in recent years.  With the increasing growth of e-Commerce, China’s distribution model is steadily moving away from traditional brick-and-mortar retail to online retail.

It’s also important to remember in China, scale is everything.  With a population of 1.3 billion people, China is a huge market full of potential.  However, given its vast geographical span and regional differences, distribution in China can be a complicated undertaking.  Regardless of the product that you want to promote, it is essential to understand how to make it available at a reasonable price to millions of customers.  It may be more advantageous to focus on a geographic location that offers the best advantage point to reach the broader China market.  Smaller cities tend to be less saturated and may offer greater scale opportunities, especially for smaller companies new to doing business in China.

Changing Consumer Behavior  

To succeed in China, you must be mindful of the rapidly changing behavior of Chinese consumers.  Chinese consumers are becoming more sophisticated and demanding as China’s middle class continues to expand.  Chinese consumers have become increasingly more brand conscious, and places more emphases on quality and value for money when making a purchasing decision.

Strategies of the past are no longer relevant.  To truly be successful in China, you must invest time in developing new strategies and building quality products and services to meet the changing needs of the Chinese consumer.

By having some knowledge of local policies and regulations, developing a solid distribution strategy, and understanding the needs of local consumers, it is possible to achieve real success in the Chinese market.

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