Companies are reviewing their China business exposure and long-term strategies, amid expanding gaps between China and the world due to COVID-19 restrictions and diverging policy goals. One takeaway everyone can agree on: China is still attractive as a source of manufacturing and as a market more broadly, but businesses hoping to succeed in the country will need to embrace an “in it to win it” mindset.
On a fundamental level, China remains an attractive place for businesses across many industries. The country boasts steady consumer growth, relatively high manufacturing capability, and extensive infrastructure. China’s manufacturing sector has moved up the value chain over the past decade, but it continues to offer competitive contract manufacturing solutions. On top of that, consumption is expected to keep growing, offering potentially huge rewards to companies that succeed in selling their products in China.
China remains an attractive option for businesses
- China’s appeal lies in production and sales. While costs have increased in China as manufacturers have become more sophisticated, the country is still a competitive source for products requiring higher levels of technology and infrastructure. Chinese businesses excel at producing mechanical equipment, COVID-19 testing/protection materials, and electronics, just to name a few. For companies selling goods or services, China’s market growth also remains competitive globally.
- Replacement costs are high. China is still a leader in infrastructure and a source of well-trained talent. While sales in Asia and a diversified supply chain are important, costs can be high for companies that are considering relocating outside of China. Investing in building capacity, talent, or an entire market outside of China requires significant financial commitment to get off the ground.
- Government policies continue to support foreign investment. At the annual meeting of China’s national legislature in March 2022, one message was consistent and clear: China intends to keep rolling out the red carpet for foreign capital and remain an open market for foreign investors.
Be in it to win it
Companies hoping to succeed in China will need to make sure they are committed to an “in it to win it” mindset and to bold, decisive action. As the China market matures, costs are increasing, and so is the sophistication of potential competitors. If you’re looking to get some skin in the game, we recommend the following:
- Invest in a “China team.” If you don’t already have one, enlist the services of a team of experts dedicated to supporting your business in China. If you don’t already have qualified people on the ground to help you handle daily tasks and achieve your goals, now is the time to find them.
- Secure the support of management. If your company management or board does not endorse the prospect of expanding your business operations in China, your chances of getting off the ground in this potentially lucrative market are dead in the water.
- Get smart about the local market. Identify the other players in the Chinese market. Is your manufacturer sending mixed messages on pricing? Understand who you might be able to turn to as an alternative provider. Are you struggling getting market traction for your product? Understand that the tastes and preferences of Chinese consumers differ from those of the other markets in which you sell.
How we can help you be in it to win it
- A sounding board for strategy. Help us understand your business and the challenges your company faces in China. We are happy to listen and provide guidance based on our wealth of experience in the Chinese market.
- Hire someone on the ground. We can link your team to knowledgeable, reliable, on-the-ground talent at affordable rate. We customize our packages to your needs, starting at 5 hours a week.
- Value-added service when you need it. Connect with our trusted associates at China-based consulting firms that work with foreign businesses and specialize in contract manufacturing, product distribution, e-commerce operations, hiring, accounting, tax and legal services.