Now could be a great time to expand into China

Any UK business looking to grow will have considered the benefits of entering the Chinese market. With its 1.4billion tech savvy consumers, rapidly expanding middle class and fast-growing creator economy, it has a lot to offer British companies.

Your instant reaction could be: that sounds too hard, with cultural and language barriers and the unknowability of a territory far from home.

However, as a two-year old start-up, we branched out into China in 2019 and spent over 12 months identifying potential clients, recruiting local employees and setting up infrastructure. It was a rewarding time, financially and in terms of what we learned about how they do business there. And we still have strong contacts and friends from the experience.

We pulled out at the start of last year, pre-empting a sharp downturn in our particular sector: against a backdrop of post-Covid economic upheaval, it didn’t make sense for us to stay at that time. However our experience was good and positive and we would be keen to go back when the time is right for us.  

That said, if I was running a company in fashion, consumer tech, beauty, those sorts of areas, China should definitely be a market to consider due to the sheer volume of the population and their interests. The economy may be stalling but it is the world’s second biggest economy (and Goldman Sachs still has China as the world’s largest economy by 2035) and opportunities are still plentiful.  If you are considering heading east to grow your SME, here’s what I learnt from my experience in China.

1. Be patient

It took Socially Powerful around 12 months from initial idea to actually opening our Beijing office. The small details take the longest. You have to be present to open a bank account and obviously to scout for potential locations adjacent to your client base. You have to be in it for the long haul because it’s not a territory where you can just hit the ground running. Paperwork is difficult, everything has to be stamped and witnessed and the officials check your signature with your ID – it can be tricky if your signature has changed.

However the moment your patience is rewarded, momentum is key. Once you have something done and ticked off, move on swiftly to the next.

2. Facetime is everything

Getting brands to trust you is important wherever you go in the world, but particularly so in China. To build that trust you need to be in those rooms, talking face to face to understand the problems you can solve for them, inviting potential clients out to dinner and getting to know them socially as people. Employ translators that speak Mandarin to make the process easier, particularly in regions where English is not so familiar. These conversations are not as effective over a Zoom/video call. You’ll spend a considerable amount of time travelling there to cement those bonds before you open your China office.

3. Location Location Location

Don’t assume that Beijing is the only place to base your Chinese office, just because it’s the capital. Analyse where the most useful outpost would be: Beijing is good if you’re a traditional Chinese business, but not so much for overseas agencies like ourselves. Shanghai is the place if you’re an international business coming to China like Nike, Adidas etc. However the tech hub is Shenzhen, particularly its Nanshan District, and that’s over two thousand kilometres from the capital. Research is everything. In retrospect, that’s where we would have put the office, hindsight is everything.

4. Know the work culture

That said, nothing can prepare you for actually being in the country, encountering its customs and particularly China’s business culture. The work ethic is strong – everyone works very long hours. Understanding their work/life balance is half the battle when making connections with new clients. It’s important at this point to fully immerse yourself in their business, and show interest in anything that’s shared with you. If you’re invited to an event or dinner, accept.

5. Network

Everyone we met over there was very keen to network and connect us with people they knew in similar lines of work – as long as they truly believe you can do what you say you do. There’s a relentless need to add you to WeChat groups and link you up with their colleagues. Use it. The more you network, the quicker you’ll understand the culture of the place you’re looking to grow into. You have to throw yourself into it, even if that feels a bit uncomfortable at first.

6. Procurement is power

Be aware that procurement departments in most companies are opaque and don’t have any direct contact with suppliers. If procurement changes their mind, a project can be pulled with little or no feedback on what went wrong or why they’ve done an about face. It’s frustrating but something to be aware of.

7. Manage your cashflow

Our early work with Chinese brands looking to expand into western markets showed us how elastic payment schedules can be in China. A 30-day payment plan can stretch into months so make sure your cashflow is strong. 

Somehow it worked out for us while we were there and was a great experience.  We made a strategic decision to leave, due to market changes; but we’d definitely consider returning if the time was right for the business.

It might feel like an unknown landscape at first, but the rewards of getting a foothold in this huge market are obvious and, on reflection, totally worth the graft.

James Hacking is founding partner of Socially Powerful.