The major countries of the world see China as a massive export opportunity. While the USA is putting America first and imposing tariffs on solar panels from China, the UK is trying to negotiate trade deals with China, ahead of Brexit from the EU. In fact, China is where the export action seems to lie for businesses of all sizes.
The Chinese market is huge export market and this offers an opportunity for business owners to export their goods and service.
Despite the huge export postential, foreign businesses need to understand how to enter the Chinese market. Carrying out due diligence is a must, especially the political risks.
A small business can export to China by collaborating with local agents and distributors. Business can also export a wide range of products but they should consider factors such as taxes, cost of freight, pricing and more besides.
Four important considerations are covered in this article.
1.Understand the market.
For a small business wishing to export its products to the lucrative Chinese market, it is important to determine if a market exists. A product’s suitability for the Chinese market is determined through product availability, the Chinese cultural traits, competition, as well as market potential.
The main product categories of goods that are imported by China should help businesses when deciding if there’s a market for their goods:
- Electronic equipment: US$431.6 billion (25.7% of total Chinese imports)
- Electrical machinery, equipment: US$414.3 billion (26.1% of total imports)
- Mineral fuels including oil: $175.8 billion (11.1%)
- Machinery including computers: $147.8 billion (9.3%)
- Ores, slag, ash: $93.2 billion (5.9%)
- Optical, technical, medical apparatus: $92.6 billion (5.8%)
- Vehicles : $71.5 billion (4.5%)
- Plastics, plastic articles: $61 billion (3.8%)
- Organic chemicals: $43.9 billion (2.8%)
- Oil seeds: $38.3 billion (2.4%)
- Copper: $33.2 billion (2.1%)
Additionally, it is imperative to know what are the fastest growing imports. Some of the goods that are increasing in imports that reflect the demand on the part of Chinese consumers include art, cereal, collection items, meat, dairy, seafood, eggs, sugar, honey, clothing, live animals, cotton, tea and spices, coffee, coins, precious metals, gems, cocoa, pharmaceuticals among others (ExporttoChina.com, 2017).
2.Learn the best export channels to use.
Businesses must consider and define the most appropriate export channel to access the Chinese market .
Whatever the chosen channel, foreign companies must work with a trusted local distributor or agent in preference to an international exporter. Consequently, before exporting to China, it is essential to establish relationship with local distributors or agents.
But note that ExporttoChina.com (2017) maintains having a particular distributor in China may limit a company’s ability to expand to various parts of the nation. Additionally, it is important to formalize the payment methods as it ensures an exporter and an agent or distributor agree on the most appropriate methods of payment.
3.Costs and pricing policy.
All business that export goods should be clear on the cost of bringing their products to the market and the logistical costs associated with delivering the products to the ultimate consumer. According to export.gov, (2017) businesses should give top priority to understanding their cost structure and the associated metrics. A business should consider the right make up or elements that comprise their products before determining their pricing policy.
For example, a company should consider shipping costs, export taxes, as well as paper processing expenditures. Firstly, proper pricing ensures exporters earn reasonable return and that consumers are happy with their purchases. Secondly, ExporttoChina.com (2017) it is essential for a business to determine the shipping process of its products into the Chinese market.
Factors such as delivery time, cost, weight, and volume of the goods as well as delivery safety should be put into consideration. Furthermore, a comprehensive understanding and solution is necessary when it comes to international freight.
The Chinese market is different to many overseas markets and a small business owner in the west should consider travelling to China to meet with some of its consumers and agents.
Close relationships are highly appreciated in China and small business owners should make an effort to visit and interact with its customers (ExporttoChina.com 2017). This is especially the case when the company is seling to another company or group of companies in China.
In conclusion, exporting to China can be difficult, but small businesses that are determined to expand into the Chinese market can succeed and have succeeded. Like all business decisions, every business owner should first carry our research to determine the if there’s a suitable market for their products in China. They must know the level of demand and establish relationships with distributors or agents across the regions to tap into the large Chinese market.