As a rapidly-developing nation, China offers immense opportunities to companies.
In 2014, the International Monetary Fund stated that China had more purchasing power than any other country in the world, offering great potential to business owners interested in expanding into China’s markets. But local business culture in China is unlike anywhere in the world, and in order to increase the odds of success in the Chinese market, foreign companies will need a thorough understanding of the practical challenges they may encounter.
With over two decades experience operating in international markets, PacNet Services is uniquely qualified to help companies that wish to expand globally. Our Asian Business Development Manager, Fei Xu, has answered some of our most frequently asked questions regarding expanding into the Chinese market.
In your opinion, which industries cannot ignore the Chinese market and should be considering expanding into China?
Undoubtedly the most popular industries in China at the moment are those specializing in baby products, beauty products and luxury goods. However, this does not mean that companies outside these industries shouldn’t be thinking about expanding into China too. Indeed, everyone should be considering tapping into the potential of the Chinese market because of its population of 1.4 billion.
This is especially true for UK companies, given that in 2015 China ranked as the 6th largest trading partner for the UK in terms of exports of goods (not services).
An interesting example of the potential of the Chinese market is the sale of more than 90,000 lobsters from Nova Scotia to China on Tmall (Alibaba’s online shopping mall site) in just one day, in November 2014.
What do you think are the most difficult challenges to overcome when considering marketing to consumers in China?
This is the million dollar question!
A key starting point is to have an established web presence in China, and it has to be hosted locally and in Chinese. Websites from outside of China can take up to 45 seconds to load (a sure way to lose impatient site visitors), and in some cases these sites may even be blocked altogether, due to the ‘Great Firewall’ of China – a measure put in place by state authorities in 2007 to help boost domestic Chinese internet companies such as the ‘Big Three’ (Alibaba, Tencent and Baidu). It essentially created a ‘black list’ and a ‘white list’ approach, with any domains not registered on the ‘white list’ automatically blocked by default.
Legislation and regulation is another complex factor when operating in the China space. Chinese authorities recently (April 2016) released new legislation on cross-border e-commerce, namely the ‘Positive List’, which essentially dictates that only goods specified on the list would be permitted for cross-border e-commerce. This list has since been adapted, and put on hold until May 2017, but it demonstrates the potential complexities when it comes to Chinese legislation.
In my opinion, however, the biggest challenge, is the marketing component. The sheer size of the market does not guarantee success, and it is both crowded and competitive. Ensuring your company, website and payment options cater to the local Chinese population is a crucial element to tapping into this market.
Electronic payment processing and fulfillment are also equally important factors.
What are the most important payment methods for e-commerce companies marketing to consumers in China?
UnionPay, Alipay and Tenpay are definitely the most popular and widely used payment options. UnionPay is the only card scheme and inter-bank network in China, with around 4.5 billion cards issued. Alipay and Tenpay are also widely used in eCommerce and mobile payments.
What are the main obstacles companies face with regard to processing Chinese payments, and how does PacNet alleviate these burdens?
Visa and MasterCard both have very low acceptance in China and can be very expensive due to cross-border costs. As a principle member of UnionPay International (UPI), PacNet Services has both ExpressPay and SecurePay products enabled. PacNet clients have access to all UnionPay cards in China with the most cost-effective rates.
Is it possible to accept payments in CNY and yet receive payment in GBP, EUR or USD?
Absolutely! With PacNet, all UPI transactions are processed in CNY and then settled into any of the major currencies as needed.
The biggest benefit of CNY processing is that the cardholder is not limited by the annual 50,000 USD (or equivalent) per person purchase limit.