Continental China is nowadays the new Eldorado of many companies wishing to develop their business in Asia. Indeed, the rising purchasing power of the Chinese middle class allows individuals to aspire to new ways of consuming and achieving a better quality of life.
However, the barriers to importing products into China are strong and companies have chosen for several years to go through the digital channel to market their products. Given this growing interest in foreign products, the government has decided to strengthen its protectionism.
Barriers to the entry of the Chinese market
Imported products are subject to many taxes in order to be marketed within the country. We can already note three main ones:
- The value added tax whose products are subject to a tax between 13 and 17%
- The consumption taxes
- Customs duties including duties on imports and exports
These types of tax break many companies to expand into the market. Moreover, the arrival of a large number of foreign brands on Chinese territory, forced the Chinese government to strengthen its policy of protectionism to incite Chinese consumers to buy domestic products.
4 ways for foreign companies to sell in the Chinese market
There are several ways for foreign brands to expand their business in China. To do this it is necessary that you analyze the best according to your objectives and possibilities:
Use a commercial agent
The importer will highlight your offer from domestic distributors and assist you in your customs procedures. The advantage of using this type of entry on the market is to have a field agent who knows the workings of the market. However, using a commercial agent can be risky because at first you will not have real control of your brand in the territory and because you will need to understand the relations between professionals in China.
Find a Chinese distributor
Passing through a Chinese distributor is a significant advantage for companies wishing to expand in the Middle Empire, as these distributors will import, logistics, sourcing and promoting your products for you. However, Chinese distributors are very picky in choosing to market a foreign brand. The reputation of your brand will play an important role in the choice of distributor.
Establishment of a sales outlet
This solution is to be chosen if the Chinese market is a promising and strategic sector for your company. The ideal is to start your activities in flagships or corners to test your market before you embark on the adventure.
E-commerce is one of the solutions most used by foreign players. Two solutions are offered to them the creation of an online sales platform or cross-border e-commerce from a site that is not hosted in China. Online sales are also subject to import and export taxes. However, in China, digital takes a prominent place in the lives of individuals especially in terms of purchasing.
Cross-border e-commerce is a growth sector
As said before, cross-border online trading allows Chinese consumers to buy foreign products. On-line sales can bypass to some extent government regulations. An increase of 15% is expected within 5 years. This enthusiasm for e-commerce is justified by the rapid adaptation of Chinese people to new technologies and the possibility of accessing products outside the country. In China, foreign products are considered to be of better quality than local products.
Related practices then emerged for the purchase of foreign products and which are called in China Haitao which is the practice of buying imported products via an online site and Daigou which involves calling a person living in the country where Is the desired product and which will serve as intermediary in the purchase of the product.
These markets were approved by the government in 2015 to boost growth in the domestic market and help e-commerce giants in China like Alibaba, JD or Tmall to expand their business.
A booming market in the country. However, face of this enthusiasm, local brands are putting increasing pressure on the government to help local businesses develop their activities, which see the rise of foreign brands as a threat to their business. According to Chan Wai-Chan, the failure to harmonize the trade game regarding imports and cross-border online trading rules, the country gives a considerable advantage to foreign companies.
This pressure from local brands has forced the government to propose three changes in terms of internal and external trade:
- A significant increase in taxation
- Limiting the volume of purchases to ensure that “personal” consumption
- A list of authorized foreign products that can be purchased online
These new rules have echoed the world and will certainly change the way in trade within the country. The government is working with the cross-border sales platforms to find a lasting solution and arranging each party so as not to impact the activities of these Internet giants on the territory.
Despite the restrictions on the market, it remains an overly important growth opportunity for the country so that the government installs too many barriers.
Alibaba an online retailer is consolidating its position and reassures its customers to continue their activities in the country. For the founder of the Jack Ma site: “” the demand for cross-border products is enormous and we expect it to continue irrespective of potential regulatory adjustments. ”
Regulatory restrictions on the market will not prevent foreign companies from marketing their brands and products in the Middle Kingdom. Nevertheless, armed with patience and the necessary actors in the country will allow these companies to be able to promote their offers in an efficient and lasting way.
Gentlemen marketing Agency
Our agency is keen to develop the projects of many foreign companies who wish to enter the Chinese market. Based on our experience in China, we realize according to your needs, a digital strategy adapted to the Chinese environment. Located in Shanghai, we can become your partner field.
For more information about our offers, do not hesitate to contact