Doing business in China (Full Episode)
Welcome. To Shanghai the. Commercial, capital of China and perhaps even Asia, I'm Tim Harcourt, the airport economist and I'm standing here on the terrace of the iconic, M, on the Bund I'm. Going to show you how to do business in the world's most populous country and what you can do to get in on the action, China. Is an economic superpower and a truly massive place but, don't worry I'll take you inside the Great Wall and give you a tour of one of the economic wonders of the 21st, century, we'll. Get insights from local businesspeople and learn from foreigners who have cracked the market and tap, the Chinese consumer but. First let's, take a look at what you need to know about China, China. Is located, smack, bang in the middle of Asia it's the world's third largest country, bordering the Pacific Ocean and 14. Other countries, from Russia to India and Vietnam the. Political, capital is Beijing, but, Shanghai, is where the main stock market is located and where business gets done China. Has more people than any other country on the planet to, me with 1.3, billion, citizens, it. Became the world's second largest economy in 2010. After growing at three times the global pace, since Deng Xiaoping opened up the economic system, in 1978. China. Is the 76, largest, economy, on a per capita basis, but. Given its got over 1 billion people that's, a pretty impressive effort, Chinese. Economic, expansion, has slowed from rapid double-digit, growth a few years ago to, a more sustainable six, and a half percent a year, China, is undertaking, a huge transition from. A nation of shippers to a nation of shoppers. From. Export led development to, domestic, consumption, and investment there's, a growing middle class through demand designer, goods health, care and even, an international education. Demographics. Are also changing, rapid. Urbanization, has created, a string of massive second, and third tier cities of ten million plus people like. Qingdao jinan Chengdu. Chongqing and Wuhan, and they're. All creating business opportunities, as well these. Cities need infrastructure, like airports, roads and railway stations for the fast trains that propel people and goods across the countryside so, we've established that, China, is a big deal NZD. Banks served at Australian businesses and found greater China it's the most popular region to do business in Asia I spoke. To the bank's greater china CEO, to find out why, today. When you look at a global business, China. Impact, is, almost, everywhere, is. It easy now. To breaking the China are. There significant. Barriers of entry when, you do, business oh sure what I think in general but, Chinese economy, is in. The transition, and. We. Are going to move from, export. Investment, leg, economy. To, more domestic. Consumption, economy. It could take maybe. 15, 20 years to, complete, the transformation, but. I would, say the global, industries, a global. Companies, are looking. At this trend and, if. They can position them well. You. Have a huge, opportunity if, you spectra historically. Shanghai. Is played a very, important role in driving growth do, you think for foreign companies now, shanghai, is the first step to. Enter the Chinese markets, do I think, a lot of foreign. Companies go, to Hong Kong first then, go to China. But. China is, opening, up for a, long time there, a lot of multinational. Companies are using Shanghai, as a. Springboard. They're going to the hinterland of China and what role do. You see the Shanghai, free-trade. Zone play. How relevant is. This to the new economy in China my, personal, view is Chinese. Government used the free trade zone as experiment. To, introduce, a lot of new, rules and regulations, which is, more more in line with international, practice. If, it's successful they, will move it out of the zone and become, a general, practice in China so, that is that is part of the economical reform is not just for a sort, of a street racer. The, ANZ opportunity, AG report shows. That Australian, businesses in Asia are far, more profitable and have better growth prospects, than their domestically, focused peers, can. Your business really afford not to consider the opportunities, that Asia presents, read. The aims at opportunity, Asia on the, SP hub comm, a you. Telstra. Is one of Asia Pacific's, biggest telecommunications. Companies and it's, been operating in China for over 25, years, it's Greater China CEO, says, local partners are essential, to success in the mainland market the.
Local Company can help you to understand, the consumer anything a bank be heavy and also that bringing you to the much bigger customer base and also, that have, into the local ecosystem including the, innovation. And the supplier. Relationship. That you may need for your business, what are your top tips for, managing a relationship, with a local partner in China, I think. Building a religion Trust is the most important. So that you need a star is small and trying, to all, set up two ambitious, plan. And, so that you can build that trust through time so take. A long time to view a trust in a business, relationship but. It was fine because now you want in the commitment, and to stay here for long term and so, and also that we know time to the airport come to give value in your partnership, set of expectation. So that you can have a win-win partnership. Differentiate, your solution service expand your business in China, you've. Done a lot of research about, companies. Forming. Partnerships across. Different, regions and industries and countries can you tell us a bit about the research findings as we conduct the research last, year for the survey more than one Southern Company so, we found out that in Odessa, touch partnership, with each edge is very unique, and, we five company, feel that you know the serve knows you know the. Always, on the. Mobile first customers, especially the middle class you know you know consumers, it's. Very important, to feel that digital partnership, with all those you know partner. To allow you to be able to explain. Your ability, to be able to serve those emerging, needs particular. In the internet, space and economists. And other social, media areas, so. It is very important so company feel that is essential, for their successful to have this partnership, and also. That they feel that they, will change their business model and also eventually, in. Ten months we were contributing, more than 10% of their vessels so the best thing the network we helped them to expand their capability. And. S is the new idea first time marketers also face in an innovation. China's. Economic leaps, and bounds dominate the world's financial headlines as a new world order emerges, but, China's not exactly the new kid on the block the. Middle Kingdom is one of the world's oldest civilizations, a dominated global trade for centuries along. The Silk Road and ancient, shipping, lanes up. Until the 17th, century China. Dominated, the global economy and the Chinese were great traders and innovators, with paper gunpowder, tee-ball. Developed, in China Shanghai. Itself, has always been an international, city as, you walk around modern, Shanghai today, you see the Far neighborhoods, like the French Concession area and in, the Roaring Twenties most, foreign countries had embassies here the. Thriving cosmopolitan. Business scene in Shanghai also. Included, a successful, Jewish community, with, one famous member, bean field al Sassoon, the original owner of the famous peace hotel right behind me right here on the Bund World, War two and the Cultural Revolution threw, the country into disarray, and depress the economy in the late seventies, Deng Xiaoping, took over as China's unofficial, leader and began an open-door policy, his reforms, transformed, China into a market economy reignited. Foreign trade and sparked, the growth that's got China on track to become the world's largest economy, being also negotiated, the handover terms of Hong Kong Macau and came, up with the one country two, systems approach. We, see in those two cities, under. Deng's reforms Shanghai. Took center stage as, one of China's key economic zones and grew, the mega metropolis, it is today opportunities. In China are endless but how can your business actually capitalize on them it, takes time to navigate, the mammoth Chinese market and if not done right and cost, you way more than you bargained for let's. Find out where to start your country's local chamber commerce should be top of your list I visited, longtime China, resident, Kenneth Garrett president of the American Chamber of Commerce Shanghai, I would. Encourage a company, that's thinking of coming to China to, make, us or, any National, Chamber one of their first stops, because. You have within. Our membership people. Who have been here for many years and they have a wealth of experience and they're quite open about sharing that experience with, people who are new to market, then, we can also help connect. Companies. If they need legal advice or other advisory, services, and we have within our membership companies. Who are willing to provide, that support but, it would be I think a very wise, and prudent and, even essential first step what. I had couple the sort of biggest mistakes that foreigners, would make when they enter, the Chinese market for, business so.
I Would say one common. Mistake is one. Day a company wakes up and they decide what we must be in China and then they rush and they, don't do adequate, due diligence, and so I would urge companies. As they think about China to, make sure that they understand, who they're doing business with you know to conduct proper due diligence and, not. To somehow feel. So. Impatience, or so eager that they were going to sort of got their garden, corporate. Advisory company, Grant Thornton can help you establish and, manage operations in China i sat, down with Kevin chan to ask whether it's better for a foreign company to go to line or find, a local partner it. Become is really confident, about their. Product offering and they really think that the product or the service could, appeal, to the, Chinese, mass. Market. Best. Thing to do I would, say I would say is still to go along however. In certain sectors, is more. Profit if you have a partner you know helping you to explore, different. Channels, different. Resources. Among the markets such as customer, channels suppliers, you know and. Then halon's. Back-office. Support site, okay so with. A parlous, help. And contribution, you, may be eight one may be able to achieve, its objective, much faster, much quicker, much more, effective but, finding, the right partner is the biggest challenge in decades any, of you do go down that road what's, the ideal self is it a joint venture or a, wolfie. When a nine-shot non Chinese company entering into China they. Could set up an entity, which, is 100% owned by their parent in, the overseas jurisdiction. And that subsidiary, is called a with it because it's it's. Also known and the capital, injection is from overseas. In foreign currency in. China we call that a roofie because it stands for W, F oh ye, wholly foreign-owned. Enterprise, and, you mentioned earlier about what's, that difference between a whoopee and a John venture a whoopee. Can, be part of a joint venture with the Chinese partner GM. GM coming, into China they have their whoopee but, that wolfie could partner, with, another. Chinese, car manufacturer, and form a joint venture together, okay. In fact GM, has many joint ventures in China in what taxes and tariffs, through. Foreign, companies have to pay when they set, up in China in, China all come except through a. Corporation. Income tax. When. We are. Dealing with trading. And selves, and sales, of services, and goods and products, we've. Just had a national. Reform of our, tech system so we are progressing, on to using v80, value-added. Tax instead. Of the old business tax you know in the past days after.
The Break we will look at how you set up get, your product around and conquer the Chinese market we will learn about the power of online selling, from local, business gurus and get tips on how to do it and set up your own team, or store. China. Is constantly, evolving as the, middle class grows in a sophisticated, consumer culture develops, new, sectors and opportunities, emerge if. You're selling to consumers in, Asia you have to be in e-commerce, here. In China online, shop t mall has 300, million registered users let's make it easier than ever before for foreign companies to sell their products directly, to, the mainland I spoke. To Ellie barbers Ken ma and Blackmore's, Peter Osmond to find out how it's done Peter, what's the advantage of selling online, into. China as opposed to traditional, ways, of selling well. Tim I think for us online, is obviously a really, major part of our business here about 80 percent of our sales in China are online and, I think for for foreign companies it's a it's a it's a relatively, easy route, to market. Obviously, Blackmore's, we have our own we, have our own companies, in China a wholly owned subsidiary Beijing, and and in branch, offices, in Shanghai Shanghai free trade zone and we have quite extensive, physical, distribution, but, online is still the biggest part of our business here and obviously we do have a very strong partnership with the team while here in China and Ken, hell successful. Our foreign. Sellers here, in China. Yeah. I think there's one numbers, around - sure is. Till, 2014. The Chinese people buying, online, market. Is over, 21. Billion, US dollar and we expect, to grows, to over. 245. Billions. By. 2020. And. Timo. Global there are over 5,000. International, brands, working, with us very successfully. So, the good example, I would take is black Moss the black boss is became, one, of the top health. Supplements, Grand Inc team one team or global Peter through. Foreign businesses, still need. A bricks-and-mortar. Approach. To selling in China or was always it online is that the way of the future ok. Bye I think I think it really depends on you on your product and and the consumer demographic. That you're, aiming for I mean for us as I say for Blackmore's we do have both a physical presence and we, have an online presence and. I think but I think particularly, for Australian, companies and smaller companies are entering the market I think an online presence is a very easy route to market and when we check you know obviously Timur has great is a great platform and a great skill in helping companies to to, sell online online. In China and who, are the big domestic, online. Shoppers, ken what regions, what demographic. What. We can say is is showing more pretentious. In the Nuala. Areas as well because for the first, year city like Shanghai Beijing and Guangzhou Norfolk, of course is easy to, buy books off online offline that would say um you, know lure areas as more important, reason what's, the industries, have had the greatest success selling, online in.
Your, Business's, experience, I've, seen the top industry, on chemo Globo is including. A baby and mother products. Health. Supplements, off course beauty. Products and also food and beverage Peter how, important, is social media, in. In selling products, in China, what's worked for you we, have a very strong, social media presence, and very strong, social media penetration, and it's really integral, to our and, to the way we market here and a good example that I think is WeChat I mean obviously we chat is extensive, in China was, over 700, million users and it's very active I think that, digital communication. Piece is very major, for any company doing business in China go. To our website for the extended interview, and hear how your business can set up its own team, or shop, businesses. From Singapore to Seoul and as far-flung as sar Paulo and, Santiago. Hugging, the panda and trying, to score a piece of the Chinese action and it's, not as hard as you may think yes, China is massive, in terms of size and population, but, it's surprisingly, easy to get your product around let's. Find out how to do it exporting. To a massive market like China might, seem daunting at first but there are ways to make it easier talk. To government agencies like Austrade, about the market and join foreign Chambers of Commerce to, learn from businesses, already operating. In China. Research. Relevant taxes, customs, duties and regulations. To make short hours won't, price you out of the market advisory. Firms like Grant Thornton can help you with this they, also have a great background check service performed, by their China office use. Technology, to get your product to the Chinese consumer without, a big investment China. Is on track to become the world's top import market for online goods by 2018. I asked, Australia Post how businesses, can get their product there our. Recommendations. You start on team or really. Test the market on the marketplace and then start to think about how you grow as you be on there how can Australian, businesses actually get their products into, China is it difficult now to resample nowadays, if, you specially, if you're starting on a marketplace, you, can start to use postal solutions and don't have to move out of your warehouse in New South Wales shipped, directly into China and straight, into the consumer, and using our network and. In conjunction China, Post Network and then you can start to move into commercial, freight solutions so as you grow you, start to move beyond postal solutions into commercial solutions for Freight. Kirinda. Organics, is an organic skincare company using special, Australian, bush ingredients, Australia. Post has helped to grow and start selling to the Chinese market in. China there's a very big demand for the, cosmetic. And personal care products. Because. The Chinese people, see Australia is a very clean, and green country. And. That, our products are very high-quality we. Utilize, the Australia. Post Timor platform, which, has been fantastic because, it's been able to, remove. A lot of the the, challenges, for us that would normally be there if we were doing, that totally on our own. Including. The shipping aspect, of it so actually getting the goods, physically. From Australia. Over to, China go to our website for the full current organic story and, find out how your business can start, exporting to China you don't, have to be in big business to make money here in fact, more SMEs, have lost money in the USA, than, China you, dramatically, increase your chance of success if you take the time to understand the local culture and how, to work with local business, partners, I visited.
The Spectacular, grant height Shanghai, for listening corporate dining and entertaining, in China how. Important, is dining. And food in business culture, in. Shanghai, it's, extremely, important, um because. It's. All about the relationship. About getting people together about, showing respect about. Giving face to the people that you're doing business with and one. Of the most important, ways of showing that is to is, to provide you, know a beautiful meal, um in, surroundings, such as this so. What are some of the dining, guidelines. For business entertainment in, China when, you come into a restaurant um, it's important, to establish, where. The host is sitting where you sit relative, to the host. Look. For visual, signs of where you're supposed to sit so keep eye contact. Better. To let them see you know the person you're entertaining, or or the most senior person sit, before you. When. Food is being ordered, it's. Extremely. Important, to. Order a lot of food because. It's very in it's, considered. Respectful. Such. Valuable, advice I asked. Richard for his practical, tips on operating, and getting around during your Chinese visit. When. You come to China we. Have a firewall here so first and foremost make, sure you get VPN, um, so you can get access to, Facebook. Google, and surround, and so forth. This, is a very big and busy city too to get around Shanghai, I, would, highly recommend an. Uber account. If. You take taxis, make. Sure you have plenty of cash and, don't forget to have. The directions clearly, written in Chinese and. Entertaining. Where do you eat out in, Shanghai, Shanghai. Is blessed, with a, multitude, of, dining, options we have Michelin star chefs we, have great local, street food it's, all here in Shanghai, um the. Bund area, is amazing. Especially, in the evening when the lights are on the. This fantastic, restaurants, and bars they're great nightlife, so, that definitely be my recommendation. Go. To our website for Richard's full rundown on Shanghai. So. It's China just about the big end of town not, at all rapid. Urbanization. And second and third tier cities and an explosion, in e-commerce is opening, up opportunities, for businesses, of all shapes and, sizes South. Australian skincare company Jeunesse has been exporting, to Asia for 20 years and recently, moved into the Chinese market I visited, the Adelaide based company to find out how they did it there.
Are A few methods of selling into China at the moment but. The, model we chose to work with was working through a distributor and that. Person, is. The, it. Validates, the relationship, it took because if they're actually, recognized by the Chinese, government they. Actually have more validity in their business model you have an online presence as well in China, ah in, a small way I, understand, there is more, of a focus to go through bricks and mortar stores because, we're, working with a product which is high-touch the customer, really needs to engage with it smell touch feel. So that, is actually where we focused, our effort in gaining our market share in China a lot. Of exporters, find China, challenging. You, must have had challenges have you are unbelievable. Unbelievable. I think, one thing to remember with the China. Experience. Is that the Chinese government can change their mind overnight, you can't assume that the. Business. Principles, by which you work within your own country applied, to, any other country that you work with it's an assumption you just can't hang a hat on so. You have to work with. Understanding. That you need to give, yourself insurance, against, sudden, changes, within the. Laws in China so. There you have it you don't have to be a big player like Walmart or Apple to make it in China almost. Six thousand small businesses export, here just from Australia alone, so. What are the tips we learnt about doing business in China, don't. Assume 1.3. Billion consumers, will do it for you China is a competitive, place and niche is the new black, get. Good legal and accounting advice about joint ventures and wolfies, use. The government badge and the chambers of commerce embassy. Connections, are respected, in China and the Chamber's also play an important, role. Try. The second-tier cities like qingdao jian, cheng. Ooh it's, not all about Shanghai, and Beijing. Do. Learn a bit of Chinese history, and culture it will impress your host even, if you can't speak Mandarin, China. Is a massive market but when you break it down by city region, and Industry it is manageable especially. With the right advice and health on the, ground it. Doesn't matter what size your business there, are riches to be made right, here in China so, play your cards right and like me you'll, be saying thanks, China eight years, to come head, over to our website the airport, economist calm where, you can watch extended, guest interviews, discover. Exclusive, offers from our partners, and find out where, we're flying to next well. That's it from Shanghai, good, luck on your China. Adventure. I'm Tim Harcourt and I'm, the airport economist.