China, the fourth largest country in area (after Russia, Canada and the USA) and the most populous country (1.37 billion population as of 2011) is now the world’s second largest economy after the USA.
China has been one of the world's economic success stories since its open-up reforms began in the 70s and 80s. Its GDP has grown on average by 10% annually over the past 30 years; the recorded GDP growth for 2011 was 9.2%.
Australia - China Bilateral Partnership
Australia and China established diplomatic relations on 21st Dec 1972; this year marks the 40th anniversary of such relations. The economies of the two countries are strongly complementary and the trade and investment relationship has developed well in the past three decades. In late 2007, China overtook Japan to become Australia’s largest trading partner, and in 2009 became Australia's largest export market. Australia is now China’s seventh largest trading partner. The bilateral trade between the two countries was worth A$105b in 2010/2011, with Australia’s exports to China totalling A$64.8b while China’s export to Australia was worth A$ 41.1 billion over this period.*
Where are the Opportunities?
The global financial crisis strike in 2008 cooled the world economy in general, and China is no exception. Acknowledging the economic slowdown, the Chinese government is viewing it as an opportunity to reform its investment and export driven growth model. With the current structural shifts in China, new business opportunities are created for Australian businesses. The key sectors where the opportunities are being presented are;
Customer Service Standards are changing rapidly.
While customer service is not a new concept in China, it is still in its fledging phase as in many emerging economies. With the rapid development of the economy the number of middle class families in China is also growing at a rapid rate. With this growth in both the economy and wealth the Chinese consumer market is evolving significantly too. As the Chinese people grow richer and have access to more information, they desire better service and are willing to pay for it.
New technology has made life considerably more convenient today. Customers are embracing the change in purchasing convenience with online shopping and mobile payment technology negating the need to go to the brick-and-mortar store to buy products or request transactions. China has also adopted the use of smart phones for alternative payment methods for customers. The use of mobile devices and the Near Field Communication (NFC) technology enabling customers to just tap or wave their phones for payment in a second has risen dramatically.
Along with the technological developments and adoption of these technologies, changes are also evident in conventional service quality improvement. An example of a business changing its service ethics to meet the changing consumer demands is a hot pot chain restaurant called Hai Di Lao. The restaurant has introduced concierges who greet customers and take them to a waiting area. Hai Di Lao has made the sometimes annoying wait for a table into part of the dining experience for patrons. The waiting area is serviced with free drinks that can be continually re-filled, and a plate of fresh cut fruits or dried snacks.
Visitors can also have free manicures or their shoes shined while they wait. And children are entertained with Chinese checkers or chess tables and playrooms. Once seated at the table diners are provided with little conveniences to continue the experience – aprons to protect clothes, wipes for glasses to remove the steam and chewing gum for after the meal. While the price at Hai Di Lao is a little more expensive than other hot pot restaurants, customers are very satisfied with the service quality and regularly return to the restaurant.
The customer service experience in China used to be a hit-or-miss affair. Now with the changing global balance of economic power and growing consumer demands, General Manager China Investments CommBank, Vivienne Yu says ‘we expect more customer service innovations and new initiatives emerging in China’.
Tips to do business in/with China
To do business in a country with a recorded history of 5000 years, you need to be well prepared. While many companies, multinationals or SMEs, often find establishing business in China challenging, here we provide you with four tips that will help you navigate in the Chinese business environment:
Diversity of the market
China has a huge population of 1.37 billion which makes the marketplace a highly diverse one. Within different regions, local conditions may vary. As a newcomer, you need to spend time understanding the local market in that specific area - talk to people in that specific industry and get support from relevant industry associations (or government bodies if you are dealing with governments).
Like in many other countries, there are protocols that you need to be wary of. It is very important to always respect your counterparts. You must be aware of the concept of “face” (a new concept for many Australian businesses) as it is an essential component of the Chinese mindset. Having “face” is a mark of personal dignity in eyes of one’s peers in China. Chinese people are sensitive to gaining and maintaining face in all aspects of their social and business life; giving people face will help build relationships while causing people to lose face may ruin any business prospect, and this is especially true when dealing with state representatives. Another tip is to firstly build the relationship, i.e. the Guanxi Cultivation. While most Western cultures tend to do business by first undertaking a transaction and, if successful, a relationship will ensue; Chinese people perceive business dealings the other way around – they believe potential business partners shall first build a relationship and, if successful, then engage in commercial transactions.
Localization is key to any success when doing business in China. It doesn’t matter how successful your business was in Australia, if you ignore the context of where you are operating, it will be hard to sustain. Localization means both to localize your products to accommodate to your local customers and to build a local team to help you better understand the culture and the complexities of the market.
For any new Australian business looking to expand into the China market, it is important to acknowledge that you need to think long-term (be prepared to stay in this country for a long period of time) and be patient, as the legal system in China is very different from that in Australia and there are many procedures you need to go through. Before you proceed too far, it is crucial to understand what approvals and licenses are required to get the deal done.
The Commbank Group has had a presence in China since 1992 with our first China representative office in Beijing. Commbank now has a 20% investment in Qilu Bank and Bank of Hangzhou, established a joint venture funds management company in Shenzhen, entered into a joint venture partnership in life insurer BoCommLife, opened our first Foreign Bank Branch in Shanghai in 2010 and jointly invested with Bank of Hangzhou in 5 county banks in Henan in 2011 and 2012.
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