The EU-China Business Association, the EU SME Centre in Beijing and the Flanders-China Chamber of Commerce organized a webinar on “How to enter the Chinese market: Different Channels and approaches” on April 12, 2023. This was organized with the support of the Flanders-China Chamber of Commerce.
Mr Davide Orlandi introduced the webinar and the EU SME Centre, followed by a presentation of the EU-China Business Association by Ms Gwenn Sonck. Ms Sonck said she was just back from a three-week business trip to China. After three years it felt good to be back. Old and new partners were all very welcoming. China's economy is reopening and life is actually as good as back to normal and there are no Covid restrictions anymore. Doing business with China, the personal contact with your business partner is very important. You need to build up the relationship and feel the vibe and dynamism of the Chinese market on the ground and how China is evolving. I advise business leaders to go and visit China again. During her visit, Ms Sonck joined two opening ceremonies of members celebrating the opening of their new factory. French President Macron also just returned from China with a delegation of 55 business leaders. Our member companies also continue to invest in China. China remains a market which cannot be ignored. It is important to do your homework and prepare yourself well before you go. It is useful to download the Alipay app, a payment and booking app you can connect to your foreign bank cards to make payments. So far, foreigners with no local bank cards cannot pay with WeChat, but China is changing quickly so maybe this will be solved soon.
Mr Alessio Petino, EU SME Centre Business Advisor, gave a presentation on “How to Enter the Chinese Market, Different Channels and Approaches”. China lifted pandemic restrictions in January 2023. There is a huge appetite of EU companies in the Chinese market, because China is a huge market, the vast middle class is upgrading consumption, there is an excellent infrastructure network, and China has been opening up. There are also many opportunities through the internet and e-commerce, and emerging products and segments. This was before the end of the restrictions. After the restrictions have been removed, we see even more appetite and an eagerness to reconnect with Chinese contacts. There is something like a “gold rush” to be on the ground. Business trips to China are resuming slowly but steadily. There are also Chinese businesses and delegations traveling to Europe to reconnect. Exhibitions and trade fairs are resuming. In the past couple of months, the Chinese government took measures to attract foreign direct investment (FDI) and key talents.
Yet, many international companies have significant challenges when facing the reality of the Chinese market. They include a lack of adequate knowledge, preparation and commitment; working with the wrong partners; cultural factors; the different role of government in business; the skyrocketing costs of logistics, operations and compliance; unprecedented local competition and nationalism; unwritten barriers; and many other factors. You have to do your homework. There are a lot of opportunities, but it is not easy to succeed. Resources, commitment and patience are needed.
There are many ways to enter the Chinese market, each having pros and cons, requiring different levels of commitment, and presenting different risks. There is no “best” way. It depends on your expectations and resources and how much you want to commit to the Chinese market.
The most traditional way to enter the market is via agents and distributors without being present with a legal entity in China. This can be done either through general trade or cross-border e-commerce. Both approaches have pros and cons. The second way is easier and faster, and you don't need to comply with many regulations and standards, but it is not that cheap or flexible.
You can also invest in China and establish an entity there. The easiest and cheapest is to establish a representative office. You can also establish a joint-venture or a wholly foreign-owned enterprise. In some sectors a joint-venture is mandatory. Establishing a start-up in an incubator is a less common way.
Another way is project-based R&D cooperation, which is a relatively uncommon and underestimated way of engagement. On the EU level, there is Horizon Europe for projects in climate change and biodiversity, and food, agriculture and biotechnologies. The member states also have their own mechanisms and there are also programs on the local level in China. A letter on IPR ownership needs to be submitted.
Licensing your technology is not only for large companies, but also for tech SMEs. It is cost effective and you have a stable source of income. There is also subcontracting of research, leveraging China's pool of engineers and scientists. The China IP SME Helpdesk provides free assistance to SMEs on IP-related issues in China.
Finally, there is the possibility of working together with a Chinese investor in an EU company. Chinese investment in Europe is ongoing although slowing in the past few years. There is rising investment screening. It could be sensitive and present some reputational issues. But is gives you more capital, know how and access to the Chinese market through your partner.
In practice, one or more ways may be pursued simultaneously and there are still other forms of engagement.
Challenges and barriers include the increased politicisation of business; the improving but still not perfect IPR system in China; standards and compliance; access to funding and financing; strict rules for data protection and cross-border transfer; movement of materials and equipment across borders; and finally human resources and mobility.
A Q&A session concluded the webinar.
Website: https://www.eusmecentre.org.cn/expert
Video of the webinar: https://www.eusmecentre.org.cn/publications/how-to-enter-the-chinese-market-different-channels-and-approaches/
Email: info@eusmecentre.org.cn
