Issues That Foreign Investors May Face When Entering China Market
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 “guan xi” 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. hat Foreign Investors May Face When Entering China Market
Alina Hoon is a consultant of Starmass International. Starmass provides professional consulting services to assist foreign companies to <a href="http://www.starmass.com/">enter the China market</a>, from <a href="http://www.starmass.com/"> China market research</a>, competitor study and China market analysis till export to China. Visit more business resources at: <a href="http://www.starmass.com/">www.starmass.com
