How to reduce costs while doing business in China

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Zhang Bochun | 03 Oct, 2012
The second largest economy in the world, China offers multitude of trade and investment opportunities for Indian exporters. This country, with more than 1.3 billion people and so many thriving sectors of economy, has become a dream business destination for companies from all over the world in the recent times.

Especially, in the last few years trading with China has become much more easier as the Chinese government has been encouraging foreign investment in the country. Previous legal restrictions to trading in the country have been removed gradually.

However, many companies aspiring to establish and strengthen their base in the Chinese market sometimes get disappointing results despite spending large amount of money. I think this happens primarily because they ignore two very important aspects: first, they don't choose the right area to start with, and second, they fail to utilize the local resources after entering into the market.

China is a large country and there exists big difference from east to west. When a foreign company enters this market, it should choose the right area to start their business, instead of choosing the whole China in one go. I suggest them to choose rich areas such as, Shanghai, Beijing, Jiangsu, Zhejiang and Guangdong. However, costs of operating a business in Shanghai, which is China economic center, and Beijing, which is China capital, are comparatively higher. Foreign firms should keep this fact in mind.

In addition, companies seeking to explore the Chinese market should look for utilizing the local resources as much as possible. In China, many business events are held regularly in every big city. Such events welcome foreign traders, and some of them provide even free meal and stay. Foreign traders should never miss to make an opportunity of these events, which also pro vide a platform to meet many influential officers and senior managers. In contrast, making business trips to meet these people can cost your business a lot.

It is also advisable that foreign marketers in China should look for reliable local partners as this helps reduce costs to a significant level. You could ask your partner to collect information, visit potential customer, and perform similar activities on behalf of you.

Knowing the payment patterns of your customers and what is common for similar businesses is another crucial issue to be considered. Here, seeking help of your trade associations and searching financial information resources such as RMA Annual Statement Studies usually prove very helpful. Your banker may also be able to support you with relevant information on this.

* Zhang Bochun is Director at Jiangsu Chamber of Commerce for Import & Export Firms, China. He is one of the SME Times guest authors.