Learning how to operate in China

Updated: 2014-09-05 12:22

By Lian Zi in San Francisco(China Daily USA)

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Small and medium-sized enterprises or SMEs, are considered a prime economic growth engine for most modern economies. At a conference sponsored by the American Chamber of Commerce in Shanghai, officials and participants touted the opportunity that China offers SMEs.

Under the title of Small Business is Big Business: Seizing Untapped Opportunities in China for US SMEs, the event was held at the Westin Bund Center in Shanghai on Wednesday. It not only attracted US SMEs in Shanghai, but also provided a free live webinar to entrepreneurs around the world.

The conference focused on the promotion of trade support in China and the US for SMEs interested in expanding into China's market. Attendees learned how to do business in China and how the government can assist them.

"I really agree with the title of today's event," said Dong Tao, vice-president of Shanghai Foreign Investment Development Board, adding that the backbone of China's economic development is SMEs.

China has been the No 1 among developing countries in absorbing foreign investment for 21 years. In 2013, 23,000 new foreign entities were approved by the central government, said Qian Fangli, director general of the China Outsourcing Institute.

Shanghai,one of the most important economic centers in China, has already built relationships with all regions around the world, said Dong. In 2013, Shanghai attracted $24.63 billion of foreign investment which accounts for more than two thirds of Shanghai's local revenue last year, said Dong.

Learning how to operate in China

It is very important for foreign investors in China to know more about what happened and will happen in this market, since "China continues to grow and the market in China continues to change," said Robert Theleen, chairman of Chinavest.

"But changing is good news for foreign investors", said Wesley Hsu, chairman of the board of Wesmax, adding that it probably is a signal that local cities in China are more interested in foreign investment.

The game has also changed for e-commerce industry.

"Go for direct import, which is the best solution for foreign vendors," said Felix Liu, vice-president of retail operations of Amazon China.

Last month, Amazon announced that it would set up operations in Shanghai's free trade zone and also signed an agreement to give Chinese customers access to products from its global supply chain.

According to Liu, there are more than 242 million online shoppers right now in China. Each year 18 million cross-border shoppers purchase foreign products directly from other countries and then ship them back to China, Liu said in explaining the motive for Amazon to start its direct shipping services in China.

"If you don't start your direct shipping services, there will be someone else helping these shoppers to buy your products and ship to China," Liu added.

Chinese customer behavior has also changed a lot during the last decade. "Chinese customers are no longer only looking for the cheapest products, but also international goods which are recognized as high quality," Liu said.

Panelists also shared some practical suggestions with foreign SMEs in China.

"SMEs can think about obtaining loans from Chinese banks rather than American banks," said Han Lin, senior vice-president of Wells Fargo.

Political lobbying is also very important for foreign investors in China, said John Tang, managing partner of Manma & Diamond. "Chinese local officials will provide you lots of assistance if you choose one of the projects supported by the government."

SMEs need to pay attention to the intellectual property problem in China. "Although the law is improved, better enforcement is still needed," said Tang.

It is very important for foreign investors to know more about the Chinese market or hiring someone who is knowledgeable about China before entering the market.

Liu provided audiences an example. In the US, people search on Google and share on Facebook. But in China, customers search on Baidu, share by using Weibo and Wechat. He added that although the population is huge in China, SMEs should focus on their target customers by choosing the right media for advertising.


(China Daily USA 09/05/2014 page2)