Moving into the Chinese market for overseas businesses is notoriously difficult. There are regulatory frameworks which need to be understood and mitigated for, and Chinese culture is somewhat removed from Western culture. This presents businesses with challenges when trying to attract buyers and develop relationships with stakeholders.
The richness and complexity of Chinese culture are clear from the traditions observed around the Chinese New Year, which typically takes place between 21st January and 20th February.
In this complete guide to moving into the Chinese market, we reveal what businesses need to know when preparing to move into China, from our years of experience working with businesses from around the world operating in a diverse range of sectors in China.
The year of the Metal Ox – charging into China
The Chinese New Year (農曆新年, 中國新年), is also known as the Spring Festival. The reason that the date marking the Chinese New Year varies from what we’re used to is because it follows the Lunar New Year, as opposed to more familiar Western calendars.
Celebrations of the changing of the seasons kick off on New Year’s Eve, the 31st of December, and stretch to the Lantern Festival on the 15th January. The same element/animal pairing is not usually seen until 60 years have passed – as a result, the last Year of the Metal Ox began on February 15th, 1961, ending on February 4th, 1962.
If your business is planning on charging into China in the Year of the Metal Ox, it pays to understand the landscape you’ll be entering to ensure you’re on a firm footing during your journey. One sure way to do this is to understand how the new year is marked in China.
2016 was the Year of the Fire Monkey. As the Chinese New Year is one of the biggest shopping seasons of the year in China, many brands from overseas line up to launch products with new year’s associations. However, as is often the case in marketing to an overseas market, many brands didn’t quite nail the Chinese associations of the Year of the Fire Monkey.
If you don’t grasp the cultural differences of a new market, or work with a local expert who does, here’s what can happen:
Louis Vuitton, even with their years of experience in the Chinese market, designed a Monkey Crew Necklace which didn’t go down too well with consumers. Unfortunately, the brand’s efforts were derided on social media sites, including WeChat and Weibo, the Chinese equivalent of Twitter.
One user commented: “Does this monkey come from other planet?” and another, “Even though I can’t afford this, I must say it’s ugly.”
Understanding the relationship between a business and its stakeholders
Following on from the point above where brands entering the Chinese market misinterpret the social cues commonplace in China, brands need to be familiar with the relationship between a business and its stakeholders in China, including its customers and partners.
As the Chinese economy boomed over the last 30 years, the country’s middle class has expanded dramatically. China’s GDP growth over the last 30 years has been greater than any other country, cementing its position as the second-largest economy in the world, tantalisingly close behind the United States.
The rising middle class presents opportunities for ambitious overseas brands, especially English brands, as the Chinese middle classes associate English brands with luxury and refinement, and therefore aspire after them. Research from Zhaopin Limited suggests that by 2022, 75 per cent of Chinese urban consumers will earn between 60,000 – 229,000 renminbi (£6,500 to £24,500) a year. In 2018, the average wages for city white-collar workers were 7,655 renminbi (£850). This represents a substantial improvement in disposable income, looking for an opportunity to be spent.
But, how to engage this growing consumer class? You need to look at consumer behaviour to inform how likely your product or service is to appeal to Chinese consumers. By understanding the various demographic patterns present in China, you will be more likely to launch marketing strategies informed by branding, which is informed by market drivers.
Gen X – 1965-1980: These consumers grew up in the post-cultural revolution era, as Mao Zedong tightened his control of China, denouncing capitalism. Gen X grew up in leaner times, and are often frugal as a result, saving money towards travel and their children’s education. Even so, those with higher pay packets retain significant disposable income, which they tend to spend on high-quality goods, with prestigious reputations.
Millennials – 1985-1994: Millennials grew up firmly in the information age, as the internet radically transformed the world. Not only this, they grew up during China’s controversial one-child policy. As a result, they are often referred to as Little Princesses and Little Emperors, because as single children they often were spoiled by parents with disposable income. They are less frugal than their parents on the whole and are more likely to spend their money on experiences they can have now rather than those they must wait for – perhaps a by-product of the immediacy of the internet.
Gen Z – 1995-2002: Gen Z are the most exposed generation to western culture out of the current Chinese generations. They are the most willing to spend money on the latest trends. Despite currently being a maximum age of 25, they are entering the world of work, and as consumers, are thought to be the most likely generation to part with their money.
Opportunities, business risk and tight regulations
The Foreign and Commonwealth Office’s guidance on business risk in China is a must-read for businesses thinking of entering the Chinese market. It first highlights the excellent opportunities for growth that China can represent for growing businesses, as the world’s second-largest economy.
It also, reveals that bilateral trade between the UK and China was worth £68.5bn in 2018, which represents a growth of 2.2 per cent.
So, the opportunity is clear. But what are the risks?
The Foreign Office list organised crime as a risk to British businesses looking to expand into China. For instance, in the recent past, several British businesses have “received potentially lucrative business offers, or other unsolicited information from China, which has turned out to be scams.”
The Foreign Office, therefore, advises any business entering the Chinese market to perform due diligence before entering into a business arrangement with new partners. This should include confirming Chinese partners are a registered business that’s been properly licensed.
Ensuring that your intellectual property is safeguarded is also a potential challenge when entering China. According to the Foreign Office, there are gaps in intellectual property laws, which can become a serious problem when infringing companies have export power and scale.
The Foreign Office has published guidance on China’s commercial regulatory landscape. The China Commercial Regulatory Summary July – December 2020 includes the latest regulations that businesses must be aware of, to understand whether a move into the Chinese market is right for them.
It seems that the Chinese Government is becoming increasingly welcoming to foreign investment in China, as the negative list rules are decreasing. Negative list rules indicate industries where investment is restricted or entirely prohibited, to both national and international investment.
Rules are becoming increasingly standardised for all new entrants. This is a hugely positive sign for businesses looking to move into China.
Making your move into China
With effective localisation and market research, entry to China can prove lucrative to growing businesses. We can help you reach one billion Chinese speakers around the world with our Chinese translation services.
Our trusted network of native speakers understands your Chinese translation challenge, meaning you will have a Chinese expert ensure your content is ready for the Chinese market. With our Chinese market language translations, you’ll enter the Chinese market without any expensive hiccups like the Louis Vuitton necklace blunder.