New export country series: Dealing with the obstacles of trading with China
6 min read
29 October 2015
With a population of over 1.35bn, the world’s largest, China is an exciting and dynamic market for UK businesses. Dennis Lin, Head of China Desk at Santander UK, tells us why UK businesses should look to the Chinese market when thinking about exporting – as part of our four-part country series.
Why should businesses be looking to as a market for export China?
Exporting should be a key consideration for any ambitious business. Companies who export are more resilient and tend to see faster rates of growth than their domestic counterparts. Exporting allows businesses to reach a much larger consumer market and can also help to manage seasonal fluctuations in demand.
The advantages specific to China are vast. The sheer size of the market and its changing demographic mean there are plenty of opportunities for UK businesses. China’s ever-increasing middle class (expected to reach 600m by 2020) is causing the economy to shift from being driven by manufacturing to consumption, leading to a higher demand for luxury goods and high-end fashion.
This increase in demand for western brands means that UK businesses can enjoy a higher margin on their products than they may in other markets, and the “Made in Britain” label is particularly strong in China, meaning that customers are willing to pay a premium for UK products.
Other sectors where demand for imports are high are dairy and alcohol. Fake alcohol is a prevalent issue in China, and recent government crackdowns are leading to increased demand for imported alcohol. The Chinese are also becoming more and more health conscious and dietary supplements have grown in popularity in recent years.
Another key factor is the growth that the Chinese economy is seeing. Whilst the economy is not expected to grow as quickly as it has been during recent years, the OECD is still forecasting growth of 6.8 per cent for 2015. This equates to growth of around $700bn from 2014-2015 – to put this into context, this figure is more than the entire GDP of Argentina or Poland.
So there are a lot of opportunities, but what do you see as the main obstacles when exporting to China?
One of the biggest obstacles for UK businesses when entering China is finding a local partner. When there are so many options to choose from, it can be difficult for a foreign business to know where to look and who to trust.
UK businesses may be used to receiving government support from the likes of UKTI or UKEF, but in China, it is not always as easy to know where to look – which can make entering the market more difficult for UK businesses. That’s not to say the support does not exist, however, and UK businesses should consider seeking support from China-Britain Business Council which, as the name suggests, specifically focuses on the Chinese market.
An interesting point to raise is that although it is often perceived as a barrier, language does not create as much of a problem as people may think. Whilst in rural China it may be hard to find fluent English speakers, it is widely accepted that English is the international language of business and so this should not deter UK businesses from exploring opportunities in the region.
So you’ve mentioned some of the obstacles that UK businesses may face when exporting, how can these be overcome?
Research is key when entering any new market, and China is no different. The more you can research before you go, the higher your chances of success once you arrive. The second aspect that should be considered is finding the right local partners. It is with regards to these two points that Santander is trying to help.
To help businesses to secure this knowledge, Santander has created the Trade Portal, an online database of information which helps businesses to identify new markets, find potential new suppliers and get practical information for over 170 countries. There are also market reports, details of trade shows as well as over one million private and public tender opportunities.
Finding the right contacts in country is not easy, and this is where networks come in. Santander has an International Desk Network which operates in its 14 geographies, as well as a desk in Shanghai. These multilingual teams can provide businesses with local knowledge and expertise to guide you through local business processes.
Any final comments?
China is an exciting market for UK businesses and can offer a wealth of opportunity. The key is to research as much as possible before you go and make the right connections in country. For more information on how Santander could help you to achieve your global aspirations, visit our site.
We’re still to hear from Santander about exporting to Brazil – so stay tuned for more expert advice.