2Bull Forex Blog

China has stirred up lots of foreign investment for their economy. Having a population of 1.3 billion and a land area slightly smaller than the USA, China is indeed a good opportunity to develop into an investment port. Over the years, China has been booming into the world’s factory with industries ranging from manufacturing, telecommunications, automobiles and etc.

Now, China has received the most coverage compared to any other developing nations around the world. The advancement of China market has been increasing in such a rapid rate that nobody wants to give a miss at a chance to jump the bandwagon of China’s prospering economy.

China’s Foreign Trade Department of the Ministry of Commerce (MOFCOM) said that China’s government had approved 44,001 new foreign-invested ventures in 2005 and China had a trade surplus of $177.5 billion in 2006.

China’s sound and steady economic growth continues to attract international funds into the capital markets in the region. said Frank Lyn, China market leader at PricewaterhouseCoopers.

However, even though there is an increasing number of a foreign investment in China, the government is also supporting the growth of their domestic industry. As China develops into a global market, the government is also encouraging the growth of domestic industries to take the chance to go global especially with the upcoming Beijing 2008 Olympic Games.

However, this may not be a piece of good news to other foreign companies who are planning to enter into China market. Not only would the foreign companies have to establish their brand presence in China, they will have stiffer competition from the local companies. In the other hand, with the increasing financial economy of China, the Chinese consumers are becoming more affluent compared to the past and thus the purchasing power of the locals have increased over the years. The Chinese no longer seek for just basic products but they are purchasing more luxurious products such as automobiles and higher-end fashion.

Domestic competition would not be the end of foreign companies problems when they try to enter into China’s market. With the main issue of language barrier, many foreign investors do not have the ability to communicate with the locals which causes frustration for both parties. Hence, foreign companies would need to be familiar with the Chinese language and culture before entering China market.

China may be a fountain of opportunities but foreign companies need to put in a lot of effort to ensure that their entry to the China market would not end up a huge loss to their company. Many successful foreign investors have worked with business consultants and research firms to ensure that their marketing strategies would be apt for the China market.

Many articles online have featured on the topic of Guanxi According to Le Figaro September 1997, Guanxi: literally “locked system” or “relations”. Personal and friendly relations, without it nothing is possible in China. Guanxi takes time to build and calls for constant attention.

The Chinese regard Guanxi as the foundation of a successful business deal. Thus, foreign companies often have problems with business negotiations as they do not have the network with the locals. Thus engaging locals who are well-versed with both the foreign and domestic culture will be a bridge for those foreign companies. These locals would have the ability to communicate better as they are more familiar with the Chinese culture. Any problems with the higher authorities would be resolved when a local party is able to help with the paperwork.

China’s economic power has been on an increasing rise ever since China opened up it economy few decades ago. This move has allowed China to develop and progress tremendously. The growth of the China market is overwhelming to both the Chinese and the world around. Statistics showed that China has been enjoying a two-digit growth from 2003, and its economic growth rate in 2006 even reached 10.7%.

However, China market does have its risky side. Chinese consumers have a strong national pride so multinational companies could lose important market segments by seeming too foreign to the locals.

Government regulations on foreign investments involve a lot of complexities for foreign companies when they try to enter into the China market. As most of the foreign investors are unfamiliar with the bureaucratic procedures, many faced a lot of difficulties and delays in their business opportunities. Hence, it is crucial for foreign companies to familiarize themselves with China business style before starting on their plan to enter into the China market.

The Chinese have a collectivist mindset whereby most of them like to fit into the society and they like to establish good relationships with others. The Chinese are usually concerned of the views of others. In China, the word Guanxi means having a close relationship with others. It does not matter whether the relationship is on a social or business level but as long they have a network with others, the Chinese believe that they will be able to get things done faster.

In China, the people treat Guanxi with high regard. The parties involved will try to keep the relationships as much as they can and enjoy mutual benefits. Usually, the Chinese will seek for a win-win situation by giving-and-taking most of the time. This type of business style usually differs from that of the foreign companies. However, foreign investors need to understand the amount of importance that the Chinese places on Guanxi. In China, the people need to have a good trust foundation to have business dealings with others.

Foreign investors can familiarize themselves through market research or to seek an appropriate local partner before plunging into the China market. Having a local partner would enable the foreign companies to link with the local market and thus increase efficiency and minimize any risks involved. A local company would know how to negotiate with local suppliers and wholesalers and they also have a better idea on how to handle complicated administrative procedures with the government.

Many foreign investors actually consulted local individuals or parties such as business or consulting firms who are able to provide professional advice and assistance regarding the China market. With professional help, foreign investors would find China market entry to be less complicated and frustrating. Furthermore, local professionals would have the necessary network to allow foreign investors to establish their business in China.

In addition, even though the China market is full of business opportunities, the market is saturated with competition. With the increase of local companies partnering up with foreign companies, the domestic industry is increasing in the product quality and gaining more market share. Thus, foreign investors have to keep in mind to fight against the strong local competition as many of them had to lower their prices seriously to gain more market share.

One of the ways to fight against strong local competition is to have a detailed consumer research to find out the demands and needs of the present consumers and what products are substitutes and complement products to them.