We’ve got your back – doing business in China

Nordea’s chief analyst for Asia, shares her view on opportunities and not least challenges in doing business in China. Remove some risk with us.

The thought of doing business in China can be daunting, especially if you’re a small outfit. But if you need a reason to dip your toe in the water, there’s that burgeoning middle class as well as the local-currency support Nordea can offer your business there, says Amy Zhuang, Nordea’s chief analyst for Asia.

Appetite for Nordic Brands

The Chinese are a discerning bunch. If you’ve ever traipsed through the markets of Shanghai, Beijing or Guangzhou, you’ll spot an awful lot of haggling going on. And only when they’ve got the price they want, will they strike a deal. It’s a complex game of give and take between buyer and seller that can go down to the wire. In other words, they know value and they understand it intrinsically.

It’s one of the reasons why they have an appetite for Nordic brands. China’s had its fair share of scandals on its path towards becoming an economic superpower. The most notorious perhaps was the fake baby formula milk scandal of 2004 with tragic results in Anhui province. While such scandals are less prevalent today, it has meant that those with disposable income in China have increasingly turned outwards in their search for quality. That’s been a big plus for Scandinavian brands where trust has become a powerful selling point. And that’s especially so among China’s burgeoning, quality-obsessed middle class.

“Estimates vary as to the size of China’s middle class,” says Amy Zhuang. “I’d put it to be well in excess of 500 million who have purchasing power that broadly parallels their counterparts in Western Europe. We’re probably talking about a figure that’s close to half the population.”

Chinese market

Nordic brands already making strides in China include Georg Jensen, which opened a flagship store in Beijing in 2015 to much fanfare building on lower key dabbles in the preceding years. Pandora is another with a strong retail presence and Scandic Foods Asia has worked tirelessly to establish a foothold in China for Scandinavia-sourced products.

“China’s strategy to shift the economy from an investment-led model to a consumption driven one is well underway but by no means complete,” says Singapore-based Zhuang. “The consumer-consumption part of this equation is yet to be fully unleashed. There’s a lot of pent-up demand and the middle classes are increasingly interested in better quality.”

Business in China, not without pitfalls

There are of course also plenty of goods flowing the other way and the interest in Chinese goods and Chinese interest in exporting to the Nordics is also gathering momentum.

Of course, doing business in China is not without pitfalls. There are political and bureaucratic layers that could be off-putting, but Nordea has at least taken some of the complexity out of the equation by enabling your business to deal with Chinese partners in the local currency. Prices can be as much as 7% lower when paying in local currency, and, as for the paperwork, Nordea has that covered too.

Opening a CNH account is also one of the services Nordea offers. It can’t legislate against every risk your business might face in China, but it can certainly take some of the labour out of the process.

Zhuang offers some other sage advice for new entrants too. “Definitely do your due diligence,” she says. “Look at your competition, the size of your competition and the regulatory framework into which you’ll be entering including what might be in the pipeline ahead.”

“You should utilise all the help you can get such as chambers of commerce and the like. Chinese companies don’t necessarily play fair and that’s the name of the game. But that’s not something that should stop you.”

“Finally, don’t expect the Chinese to roll out the red carpet for you. Those days are gone. Competition is extremely fierce and it’s key to understand that they are not guaranteed survival either. Just adjust your expectations and have a plan.”

Sound advice. And we’re here to support you. To find out more, click here.

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