Through many years China transformed into a modern country with ultra-modern metropolises and more than one billion customers. Value of local consumers purchasing power increased during huge economic growth which led them to become consumers of luxury and high valuable products. In comparison to domestic products, western recognizable brands have advantage because of its high quality and prestige.
Market opportunities are huge, and the numbers that describe it make an impression on entrepreneurs from all over the world. Each entrepreneur who wants to do business in China will face many obstacles. In order to successfully start importing to China, first we need to understand local expectations and business culture. Without the experience in Asian market, entrepreneurs are exposed to huge risk and potential financial loss.
Many small and medium enterprises in Europe have marketable products for Chinese consumers, but that doesn’t simply mean that it’s the only factor to achieve business success on the local market.
We strongly recommend taking into consideration China as a strategic export direction. It is not only a business opportunity, but an opportunity to improve the offer for the Far Eastern customers. This is undoubtedly a complex, multi-faceted trade operation that requires the manufacturer to fully engage in the project at every stage.
The largest volumes of export from Poland to China are caused by the exporters of dairy products. Among others: Mlekpol, Mlekovita, Łowicz, Rotr, Colian, Van Pur, Bakalland, Sante, Tago, Flis etc.
Foreign Trade Offices of the Polish Trade Agency (PAIH) are a global, constantly developed network of the Agency’s divisions responsible for providing support for Polish exporters and investors, overseas. Offices have also been designed to attract foreign investors. PAIH is Honour Patronage of Food Export Congress 2018 held in Warsaw, Poland.
China in numbers
Export of Polish products to China increased in 2017 almost by 1/3 comparing to 2016 and was highest in the history. Total export from Poland to China in 2017 was valued at 3.35 billion dollars.
Total value of imported goods in 2016 to China was valued at 1779.152 billion dollars. Biggest exporters to China are South Korea, Japan and Taiwan. Polish import was only 0.2% of total imported goods.
Key factors of entering the Chinese market
For importing companies, the most attractive group of consumers is middle class and households in urban districts. According to McKinsey’s report „Mapping Chinese Middle Class”, in 2012 this group was counting 256 million citizens. In the next ten years, it means till 2022, this number will increase to 357 million citizens. When analyzing the market, entrepreneurs should take into consideration the purchasing power of the social group under investigation. During the analyzed 10 years, by 2022, as a result of the enrichment of the middle class, the annual disposable income of households of the entire middle class (all of its component sub-classes) will increase by 166% from USD 1,476 billion to USD 3.912 billion, giving an amount of 11 thousand. USD per year for a household in 2022.
In the new 13th Five-Year Plan (2016-2020) key opportunities for Polish entrepreneurs include: children, baby and maternity products; elderly healthcare and home medical; e-commerce retail.
Key opportunities for FMCG imported from Poland are dairy products such as milk serum, milk, baby formula, milk powder, yogurt. Other products with huge potential are also: sugar, cocoa and its products, biscuits, frozen strawberry, apple, chicken, beer, vodka, tea, frozen fish, potato starch, honey and cereals.
Barriers to entry
First and the most important barrier is distance from Poland. Because of huge distance, logistic is one of the biggest cost to consider when calculating business profitability. Another important factor is right business partner in China. Also, we cannot forget about different business culture. Before starting business with Chinese partners, it is good to acquire some knowledge about doing business with domestic partners.
Another issue is the barrier of acquiring information and knowledge about Chinese market.
One of the key factors in doing business is trust. To build trust between Polish and Chinese entrepreneurs requires big amount of time and requires big amount of capital investment.
Characteristic of the Chinese Consumers
The Chinese citizens are travelling the world and thus become more and more open to the Western trends in fashion as well as in food sector. However, their expectations and tastes still differ from those of western consumers. Above all, they value the brand’s history and the country of its origin. The longer the company’s history is and the brighter it can highlight this information- the better. Another important feature is the requirement for the highest quality of products. The Chinese are more likely to buy certified products as well as products which are recognized at the European market. Particularly valued are the products with German certification. When it comes to marketing, picture content and short advertisement videos begin to play an increasingly important role. In the busy daily life, people rarely have time to read long leaflets or text-filled advertisements. The Chinese consumers value quick and convenient shopping. As we can observe on the streets, people are mostly starring at their smartphones, which is why it is worth to focus on social media offering an ever wider range of services when planning a marketing strategy.
In July 2016, CNNIC- China Internet Network Information Center (Zhōngguó hùlián wangluò xìnxī zhōngxīn) presented a report on the development of the Internet in China. According to these information, by June 2016, the number of Internet users in China was 710 million, and the number of mobile internet users 656 million. At the same time, it was noted that up to 92.5% of the total number of Internet users in the PRC use the Internet via mobile phones. As a result of the continuous development of the Internet, which is an inherent element of many areas of modern human life, these numbers are constantly growing.
China is currently the largest and fastest growing online retail market. Before buying a given product, consumers in China often compare prices on different types of websites, look for information and opinions of other people. Due to the extremely wide range of products available in China, Western brands must distinguish themselves with something special to attract the attention of their potential customers. Chinese people appreciate reasonable prices and promotions, as well as originality of the product and the highest quality. One of the most decent products on the market are gift products that attract more and more buyers.
Polish Trade and Investment Agency
The Polish Trade and Investment Agency (PAIH) supports Polish entrepreneurs in understanding the specifics of doing business in China. Thanks to a comprehensive approach, Polish Trade and Investment Agency’s office in Shanghai reaches reliable sources to provide verified information which are necessary to make an investment decision. Through the GoChina program, they support entrepreneurs planning to enter the Chinese market, which is often not taken into account in the export plans due to the existing risks and costs. All activities undertaken by the program are supported by the Polish Economy Brand, in order to strengthen its position on the Chinese market.
Andrzej Juchniewicz (PhD)
Head of Shanghai-based PAIH Office