Doing Business in China: Asian giant’s challenges

Last May 11th, the seminary “Doing Business in China” was held within the cycle of seminars “Doing Business” organized by the Master in International Business of the University Carlos III of Madrid. For this occasion, Sergio Herranz Sampedro, Manager and CEO of Eastech Electric, S.A.U., has been with us to make known some striking features about one of the current biggest markets, the Chinese market.

First of all, it should be clear that when talking about Chinese market, we refer to the economy with the biggest growth rate of all economies. An evidence is its increasing GDP’s which, even though it is the lowest of the last years, is of 6.9% approximately while USA’s one is of 2 or 3%. Simultaneously, an indication proving this economy’s disproportionate growth is present in the Chinese dire poverty rate which at the beginning of the 80’ stood around 80% and in 2010 just around 10%. Another demonstrative and tangible aspect could be the amount of airports and ports as well as their size and quality, being widely worldwide recognized.

This attractive growth has let this market to be one of the most important of the length and breadth of the globe. However, this does not mean that there is no margin for improvement or that it is a market easy to exploit, consequently all its strengths, weakness, threats and opportunities should be considered.

Doing Business in China: SWOT analysis  

  • Strengths: having a population over 1,300 million entails having an exclusive major local consumption. It includes having laudable work and slaughter capacities as well as a low price and almost endless work force.
  • Weaknesses: high distrust level to third parties since they have a culture and a value scale different to ours, which hinders its access to foreign markets. It is also outstanding its lack of control over the commercialization of what it is manufactured there.
  • Threats: the deceleration of its revenue growth (at an economic level) during the last years could create social and political tensions, exalted by the huge differences among the wild capitalism as economic doctrine that they economically enforce, and the social and political rights performed there. Other threats are the existing tensions with the neighboring countries (Taiwan, Japan, and North Korea) or the significant growth of these countries such as Vietnam and India.
  • Opportunities: China itself is an opportunity but not just as market where it is possible to sell but also as market where you can find exportable business opportunities in both ways, independently or through joint ventures which is the most chosen option by big companies due to internal policies of the country (such as the Volvo’s case, an example of joint venture between Chinese companies, with “Geely” in this occasion).

Chinese entrepreneur profile

At the same time, it is worth to note two characteristic aspects to bear in mind when transacting business with Chinese people, such as patience. They take advantage of patience, since if they notice the buyer is in a hurry they assume the buyer needs them, so they will make this a weakness to exploit getting a high price in case products are needed earlier than expected. Simultaneously, even if a contract or a signed agreement exist, Chinese assume they can raise accorded prices if their raw material providers do the same.

On the other hand, people with great fortunes often deposit a huge part of it outside China, generally in Hong Kong. This, along the aspects above-mentioned, such as their mistrust and their endless work capacity, fulfill the generic profile of the Chinese entrepreneur.

In conclusion, China is a rich market with a rather unique culture, with socially and politically different ideologies regarding ours and theirs performed at an economical level and it is a country that has escaped dire poverty. Actually, it is recognized as a worldwide leader economy, with an immeasurable internal market which involves some advantages and threats we should take advantage of, as well as being careful when immersing in the unique and attracting Chinese market.