Opportunities for UK businesses to expand into China

Dr Johnny Hon, Chairman – the Global Group 

The Chinese market is still growing at a healthy pace, offering considerable opportunity for Western businesses and investors.

I set up venture capital, angel investment and strategic consultancy, the Global Group, a little over 20 years ago, to facilitate business and commercial opportunities between the East and West. As the Chairman and Founder, I have always tried to ensure the company has lived true to its motto – ‘Bridging the New Frontiers’ and kept its goal of encouraging and facilitating positive China-UK relations at the forefront.

Over the last two decades, I have seen opportunities for collaboration between Chinese and Western businesses diversify and increase hugely.

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There is a widespread assumption that the Chinese market is easy to enter because of its mass consumer base, with a population of some 1.3 billion, including a rapidly growing middle class, already several hundred million strong. However, this on its own is far too simplistic a view.  Rather, it is crucial that you conduct thorough due diligence to understand this most complex of markets, if you want your venture to be successful. Understanding business and cultural etiquette is vital. You must find the right business partner, one you can trust and who will help you to navigate the nuances and mores of the Chinese market.

China is a vast country and its cities offer a variety of business opportunities that run the whole gamut of sectors. Beijing, Shanghai and Hong Kong are renowned as international business hubs but these markets can be overly saturated and do not necessarily offer the best opportunity for a company considering China entry, unless you are already a well-established international brand.

Businesses should keep an open and enquiring mind and also consider some of China’s second, third and fourth tier cities. Many of these actually have populations in the millions, bigger than some European capitals, or even countries, and, with their own unique characteristics, are contributing to the growth and development of the Chinese economy.

Wuhan, for example, which is twinned with Manchester, has an annual growth rate of 10.5% and has become a vital industrial and financial hub for central China.

In 2012, China became the world’s leading trading nation and its import market has continued to grow over the last few years, as the country opens up more and more. A fast-growing area of opportunity is within the luxury market, where there is an increasing demand for international  brands. The expanding middle class are an increasingly discerning market, looking for world-class quality. Not only are purchases of heritage brands and luxury products booming, high-end leisure services and activities, including outbound tourism, are also increasingly sought after.

Looking to the food and drink sector, China has become the largest market for red wine, overtaking France. As the demand increases, and Chinese appetites grow and tastes develop, it is expected that white wines and champagne will also become more popular, just as the somewhat earlier taste for French brandy is now complemented by that for Scotch whisky.

Despite this huge appetite for foreign goods, there is no guarantee that an import will prove successful. It is important to do your research and gauge market trends before expanding overseas.

Technology is a sector that is growing rapidly in China and offers a huge number of opportunities for businesses looking to expand into the region. China is fast becoming a global leader in FinTech, including mobile payments and e-commerce. In fact, Chinese cities are the world leaders in the transition to cashless consumer economies, as mobile payments surge at a rate unparalleled by any other country.

FinTech is not only an investment opportunity for those looking to expand into China, it also facilitates global business, especially in terms of cross-border transactions, making them more timely and efficient.

The technology market in China is intensely competitive, and in order to take good advantage of the opportunities, you must ensure that you have a strong concept and a business plan that works. If possible, it is best to test any new technology in the UK or another developed market prior to trying to expand into China.

The UK-China FinTech Alliance, launched by BGTA, with its trusted, single-entry point, could be a great gateway to the technology market in China. This alliance is intended to act as a strong support system for the established UK FinTech sector and its rapidly growing Chinese counterparts.

If your concept is successful in the UK, it puts you in a stronger position for when you take your idea abroad – whether it’s in FinTech, fine wine or any sector in-between. You can show potential investors that your business model works and that there is appetite and space for your concept in the market.

Ultimately, China offers manifold opportunities for business considering overseas growth. However, it is vital that anyone considering China does their homework and is fully aware of the unique and complex features of this market and not assume that success is guaranteed.

China is open for business but you really need to work at it.

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