Break into Shanghai & Beijing Asian markets

The Chinese market is a lucrative and attractive option for foreign businesses to tap into. Despite the COVID-19 pandemic that affected worldwide trade and caused enormous economic repercussions, the Chinese economy continues to grow. With a population over 1.4 billion people, based on the latest United Nations data, China is a vast market in which, if a business can capture even a small niche, the result will be immense revenue and growth.

However, breaking into the Chinese market is not easy, especially for businesses with limited or no experience in doing business in the Asian country. We discuss the challenges and how you can break into the market with winning strategies.

Why is it difficult to enter the Asian markets such as Shanghai and Beijing?

The Chinese market is divided into different tiers, including different cities, depending on how mature the market is and the average income levels. Tier 1 cities include Shanghai, Beijing, Guangzhou, and Shenzhen.

These cities are highly populated with a sizable middle-class representation having income levels higher than the national average and a GDP of over US$1.722 trillion, according to figures from CEIC data. Although Tier 1 cities offer the lowest risk of entering the market, they also pose more competition and higher operational costs.

Foreign businesses face these challenges when doing business in China:

Uneven economic growth: China’s vast size, uneven economic growth, and social differences in different areas pose significant challenges for businesses compared to other Asian markets such as Japan, Thailand, and South Korea.
Differing consumer lifestyles: The lifestyles and consumer spending habits vary across different geographical locations in China. Hence, businesses need to target a specific city or province which will offer them the best ROI based on their niche. For example, Shanghai, China, and other coastal cities in Zhejiang, Guangdong, and Jiangsu provide lucrative opportunities for foreign businesses based on their higher income levels and population.
Strict regulations: Many industries in China are heavily regulated and are off-limits to foreign companies making it almost impossible for foreign companies to penetrate that sector. For example, foreign companies are restricted from doing business in domestic water transport, geodetic surveying, and gene diagnosis. The food safety and environmental regulatory laws are also incredibly stringent. According to the Chinese foreign investment catalogue, foreign investments are divided into ‘encouraged,’ ‘restricted,’ and ‘prohibited’ categories.
Communication barriers: The apparent communication problem also poses a challenge for foreign businesses since the primary language that people speak and understand in China differs across regions.
Intense competition: The Chinese market is highly competitive, with domestic and foreign competition posing challenges for new businesses.

What is the best market entry strategy for China?

The Chinese market offers a profitable opportunity for foreign businesses if they devise an intelligent market entry strategy that can adapt to changing consumer needs and habits. Below are some of the best tips for entering this Asian market:

1. Identify your consumer base

Research your target market and the geographical location you want to start with. First-tier cities in Shanghai, Beijing, and Guangzhou are considered the safest bet for new businesses.

2. Focus on a specific niche or region

The various cities in Shanghai, Beijing province, and other coastal areas offer good opportunities to break into the market. Focusing on the cities where China has created industrial clusters can help you narrow down on the best location. For example, the Shanghai area is famous for its petrochemicals, chemicals, pharmaceutical, automobile, electronic apparatus, and financial sectors, while Beijing spearheads the IT, communications, and electronics industries.

3. Study the Chinese rules and regulations

Study the Chinese rules and regulations that apply to various industries and sectors to know precisely how long it will take for you to reach the market after conforming to all the laws. The Tariff Adjustment Plan is just one of the many updated laws to take note of in 20232 before venturing into the market.

4. Select your Chinese distributors, agents and partners wisely

Choose your Chinese distributors, agents, and partners carefully. You want your partner to be well-versed with the local demographics, rules, and market needs, which will be critical for your success.

5. Safeguard intellectual property rights

Protect your intellectual property rights before entering the Chinese markets, whether in the Shanghai district or any other area of the country. Unless intellectual property laws protect your brand and services, you will not be able to carry out any legal proceedings against the infringement.

6. Leverage e-commerce infrastructure

Go digital and set up an online website for your business. Thanks to COVID-19, the e-commerce industry is growing rapidly, and more consumers have moved their shopping activities online. The country contributes over 30% of the total sales in the global e-commerce market, with the expectation of hitting US$1.4895.5 trillion in 2023, according to Statista.

7. Partner with an experienced international shipping company

Choose a reliable shipping and logistics partner to ensure that everything runs smoothly along the supply chain and you can deliver goods to the suppliers and consumers quickly and safely. Doing so would further enhance the brand reputation and consumer loyalty to the brand.

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