Published 21 April 2022

Expanding your business into China? Here’s what you need to know…

While China’s foreign relations can be strained, over 100 countries around the world currently rank China as their top trading partner. Stuart Crockett, former WA Government Commissioner to Greater China, shares this advice with Australian businesses considering expanding into this lucrative market.

Expanding your business into China? Here’s what you need to know…

While China’s foreign relations can be strained, over 100 countries around the world currently rank China as their top trading partner. With a population of over 1.4bn China is considered the world’s largest consumer economy – it also holds great commercial appeal for many Australian businesses.

Before you book your flight to Beijing it’s important to know how to approach expanding into and securing investment from this lucrative market. We invited Stuart Crockett, former WA Government Commissioner to Greater China, to share his thoughts and insights.

 

“China is a fascinating and complex place to do business, but it changes all the time,” says Stuart. “This means that the China you think you knew even just a few years ago probably isn’t the China you will encounter today, so leave any preconceptions and biases at the door and be prepared to enter a journey of rediscovery.”

Etiquette matters – but it isn’t everything

A quick Google search on ‘working with China’ produces a litany of guides on business etiquette. Stuart argues that while etiquette is an important part of building relationships, there are many other nuances of working with China that are equally important to understand.

“In the West we are obsessed with Chinese etiquette but Australian businesses needn’t get too hung up on this,” says Stuart. “Chinese people are empaths and their ability to sense a good person is exceptionally strong. So if you make an effort to understand their customs and you are honest and open in your approach, they will feel you are a good person and want to work with you.”

Choose partners carefully

China isn’t the type of market that you break into overnight – it’s always friends first, business second. In working with China Australian businesses must accept that it takes time to build trust and develop these relationships.

“They say you should know someone for a thousand days before you become true partners,” says Stuart. “This doesn’t preclude doing business during that time, but it does stress the importance of building trust before you sign away any part of your business or your IP. By nature Chinese people are incredibly loyal, so take your time and you will find the right partner.”

Stuart also urges Australian businesses to form local strategic partnerships for greater impact. “As individual suppliers we cast just one drop into Chinese marketplace,” he says. “Whether we are selling wine, produce, education or tourism, it’s far more commercially astute for Australian businesses to hunt as a pack, and to tell the entire story as a group.”

Seek counsel wisely

When many Australian businesses first move into China they underestimate the influence of their local Chinese business networks.

“Having local Chinese advocates allows businesses to validate their products and ensure alignment with Chinese consumers before they travel to China,” Stuart says. “There are some strong Chinese business communities in Australia, so consider talking to your local network first about your product. They will tell you what’s good, what’s not,and if packaging and messaging need to change.”

Stuart also highlights the importance of approaching China from a position of empathy and relatability. “In China people want better lives, better food, better education, better homes, more travel and other experiences, just like Australians do, and our cultural similarities are even more striking,” says Stuart. “If Australian businesses enter the Chinese market looking for similarities, trying to make connections and fulfil these needs, there is a much higher likelihood of success.”

In China resources like AusCham and Austrade are also available to help businesses plug in, seek counsel and expand their network.

Control your brand and messaging

Relinquishing too much control to local distributors is a significant factor in the failure of many Australian businesses that operate in China.

“There are many good agencies that specialise in helping international businesses to develop brands that resonate with local Chinese consumers. By working with these agencies to control some of your messaging you can retain control of your brand and how it is perceived in the marketplace,” Stuart says. “Retaining control also safeguards the time and investment businesses make into building their brand if their business partnerships later fail.”

Compelling investment propositions

In 2020 China’s outward foreign direct investment reached $153.71 billion, earning the country’s first ranking as the world’s largest foreign investor.

“It seems the whole entire world wants to do business with China right now, and the days when they would throw money at anything are long gone,” Stuart says. “Chinese businesses have become increasingly sophisticated in their approach to investment and they need to be presented with highly sophisticated proposals.”

“A strong business case should be very clear on the value proposition, right down to the return on investment proposition. Businesses should also detail likely customers, supply chains and how China fits into all of that,” Stuart continues. “With international investment now requiring approval from Beijing, investment proposals should articulate the macroeconomic advantages for China too.”

Emerging technology opportunities

Technology and innovation is another interesting area for Australian businesses, with many exciting opportunities to collaborate on AI, AR and VR.

“China has an immense ability to rapidly scale, deploy and adopt technologies and the Chinese government is investing an incredible amount of money into being the world leader in this space,” Stuart says. “There is also an insane amount of money in private equity and venture capital ready to fund innovation and take it past proof of concept to true commercialisation, and this presents a strong opportunity for Australian businesses to partner with China in developing some of these technologies.”

For Stuart the key takeaway for businesses considering moving into China is to know where the opportunities are and whether you have a product or service that delivers on what China wants and needs. “If you do, then it is a market worth pursuing,” he says. “And if your business offering aligns with China’s expectations, and if you can help them to achieve their goals,then those doors will always remain open to you.”

For help finding the right talent and resources to grow your business in China connect with your local Gerard Daniels team.

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