China Market Guide

Several Important Issues in Entering China Market

Generally speaking, Chinese merchants deal with foreign trade according to international rules and regulations. Then different peoples have different customs and habits. This is the same case in their commercial activities. We suggest that you should pay more attention to the following issues when you start your business in China.

1. Emphasis on research of macroeconomic environment, foreign trade development, and dynamics of market movement.

As you all know the importance of knowing the market of your product before you get into it, it is especially important in case of the Chinese market. Although everyone knows that China is a huge market in terms of population and territory, yet there is a great geographic difference in terms of per capita income and per capita consumption. Generally speaking the per capita income of east coastal areas is greater than inner parts and even far greater than the west rural areas. Therefore the thorough market research is crucial in the decision making process of your China market penetrating strategy.

2. Stipulate marketing and sales strategy with Chinese characteristics.

Take McDonald's for example, after lengthy marketing research, it realizes that most of Chinese parents always put their children's interests at first and sometimes they even spoil them. So its strategy is tailored to the Chinese teen-ages. Their promoting means including TV Ads, leaflets and Birthday Party arrangements are all targeted to the Chinese children, as they know when kids decide to have burger, their parents will take them to McDonalds's. This shows that it is essential to know the market and people's behavior in this market.

3. Conduct comprehensive research on the credit standing of local partners.

As not all Chinese companies have sound financial standing, especially some firms may show blue in their accounting book, but the actual situation will not be as healthy as the book shows, so it is very important to visit your local partner before you commit yourself to the cooperation.

4. Understand fully the regulations and restrictions of import and export commodities.

The Chinese government organizations such as Ministry of Foreign Trade and Economic Co-operation (MOFTEC) may provide this information. Please make sure you read through and fully understand them. MOFTEC has got a web site, which is www.moftec.gov.cn

5. Understand trade practices prevailing in China, such as payment terms and settlement of currency.

(1) Payment terms
Most trading firms or mills can only accept payment in US Dollars and they would always ask for L/C at sight terms when you try to buy goods from Chinese supplier. Some firms now can try to accept L/C at 60 or 90 days, which gives the client, here certain length of finance credits.

(2) Shipment arrangement
Most client here would like to use sea shipment as it is more cost effective, only those items which need quick response to the marketing changes, such as fashion items, clients require shipment by air but usually shipment by air from China is very expensive. If it is sea shipment, the usual length from any Chinese port to any European Main Port is 4-6 weeks. So when you buy goods from China, you should also take time into consideration and make sure you can get your goods on time.

(3) Price terms
For visible trading business, there are certain price terms (ex-works, FOB, CNF, CIF etc.) that are used for doing business with another country. For doing business with China, most Chinese firms tend to offer you price on CNF or CIF terms which means that the price they offer should include freight and/or insurance charges. Occasionally, if the buyer can make shipping arrangement, he could ask China to quote on FOB Terms.

(4) Quality issues
Quality control is a very tough task when you think of doing business with China. In order to achieve consistency in quality, most firms would like to pay frequent visits to the mill or employ quality control people locally if the quality requirement of the goods they need is of quite high standard.

6. Understand the importance of relationships in formulating effective business with china.

Building up close and cooperative relationship with your Chinese partner in both business and non-business environment is crucial to the success of your business. You might have already heard a lot about this from media and newspaper. Here let me say, in certain sense it is true. Chinese people usually look for long-term, trustful relationship rather than short-term profit gearing.