Time to get into the Chinese market
The BBC today reported positive news as Chinese official export figures for the previous month (Sep 2009) are said to indicate that the economies in the rest of the world are recovering. This appears to be good news for global economies, but there is also another trend which in the longer term could well have benefits for those in the West who get in a position to take advantage.
One of our senior managers from our China office is in the UK at the moment. One of her immediate observations to us, on this first visit in three years, is that things now seem comparatively “cheap” in comparison to how she remembers last time. The comment was made after a shopping trip to Asda. It’s likely indicative of how prices in China have increased as well as current exchange rates working in her favour.
As a company with a long established Chinese office branch, we have experienced wage inflation, certainly amongst the white collar educated staff which our business tends to employ. Recent valuations of the pound has also made purchasing in China seem more expensive for UK companies, as the Renminbi (pegged to the U.S. dollar) has risen in value. It is nevertheless a surprise to hear such a comment, especially as we have considered China a cheap place to do business for so long.
The reported information on Chinese exports http://news.bbc.co.uk/1/hi/business/8306052.stm sourced from the Chinese General Administration of is said to have been helped by China’s own stimulus package. This package, amongst other things, offered Chinese blue collar and peasant workers cash stimuli to purchase white goods made domestically, thus replacing the Western demand which dropped off in the Global recession.
With wages rising and consumer demand spreading throughout larger swathes of the population, China will quite probably not be the “cheap” nation for a great deal longer. The McKinsey Chinese consumer survey http://www.mckinsey.com/locations/greaterchina/McKinsey_2008_Chinese_Consumer_Survey.pdf reported last year how approximately 15% of the affluent Chinese are willing to pay more for Western branded or “quality” goods. The smart money for business - irrespective of a B2B or B2B focus - is to get into China and start selling there. With correct initial strategy and pricing, establishing a brand, a presence and a customer base will surely pay dividends for those businesses with a longer term view. As China becomes more affluent across its society and price inflation makes Western services and goods more affordable, an established Chinese client portfolio could significantly enhance revenue as well as adding to company valuation.
Nevertheless, setting up in China remains a complex, daunting and expensive task. If your business is positioned to brand or sell via the web, exploring setting up an initial low-cost presence via the World Wide Web could be the way to go. With the right partner, it could be profitable to explore China marketing avenues.
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