Tap into China’s potential

Terence Chiu, Head of CMB, HSBC China, provides some insight into accessing the huge Chinese market

International Festival for Business 2016

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The phenomenal growth rates that China has seen in the past may have slowed but the country is well positioned to pursue its new direction - striving to grow domestic demand, upgrade infrastructure and support emerging industries.

For companies prepared to take a long-term view and do the necessary preparation, China still offers significant opportunities.

Rise of the Chinese consumer

There is huge potential spending power in China. Chinese travellers spent USD104.5bn overseas in 2015, increased by 17 per cent, according to data from the China national Tourism.

At home, too, Chinese consumers have rising income to spend, and they focus on quality. 90% always buy the highest quality product they can afford, higher than in any other major economy Ipsos Moi 2014. This focus on quality is good news for British businesses.

“Brand Britain has a reputation for quality in China,” explains Terence Chiu. “It is, though, important to remember that however good a brand's reputation in the Western market, bringing that brand into China does not guarantee success.”

Brand Britain has a reputation for quality in China

Do not treat China as one market

China is a huge country, with significant differences between each region and city, as such thorough research is vital.

“Any business coming to China needs to be aware that it is not homogenous - North, South, East and West all have individual characteristics,” says Chiu.

“You need to approach the market carefully and understand the different consumption behaviour in each region.”

Ipsos Moi 2014

Don’t ignore China’s ‘other’ cities

The temptation for many businesses coming to China is to focus their attention on the major cities of Shanghai, Beijing, Guangzhou and Shenzhen. However, away from the east coast is a whole range of so-called second and third tier cities, many with populations over one million people that could offer huge opportunities.

“We are certainly seeing a trend of companies moving away from the east coast and looking to some of China's less well-known cities,” says Chiu.

“Consumption power is getting better and better in those cities, and there is generally less competition than in the major cities.”

Look to the five-year plan

For British businesses considering the Chinese market, the Five-Year Plan, which sets out China's roadmap for growth, can provide valuable insight. The latest iteration of the plan - the 13th - outlines the `new normal' for China with less of a focus on growing GDP at all costs and more a drive to lay a foundation for sustainable, long-term growth.

The plan highlights the key `strategic emerging industries' that the Chinese government is focusing on. These include energy efficient and environmental technologies, next generation information technology, biotechnology and high-end equipment manufacturing.

“Examining the five-year plan shouldn't replace wider, in-depth market research but it can certainly help signpost to overseas companies where the opportunities in China may lie,” explains Chiu.

Find the right support

Even though China continues to open up at a great pace, the very size and complexity of the market means that it is difficult to crack without building partnerships with people that know the market inside out.

“It can be challenging to navigate the regulations and general business environment in China, says Chiu.

“But it remains a potentially very lucrative market for business that can find the right support and are prepared to take the long view.”

For further information about trading internationally, visit the HSBC Connections Lounge at the International Festival of Business in Liverpool where an HSBC Trade Specialist will be on hand to answer your questions or call +44 (0)800 78 31 300.

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