China holds huge market potential for Canadian businesses, but it's important to understand the financial and cultural landscape before selling in the East. With consumer prices up 2 percent year-over-year in China, it may not do to wait much longer to establish a foothold in the region.
According to the Bank of Canada, businesses tend to underestimate the time and cost necessary to achieve favourable contract terms or find a partner that can deliver on distribution requirements. Here are some tips to help you get started on the right foot.
Be sure that your business is ready to take on this project. Establishing a foothold in a foreign country requires patient investors because it's a major commitment of time and resources in a very different environment. The preparation should include an adjustment to local tastes, regulatory requirements and the preferences of customers in the region. What might sell well in Canada could bomb in the Chinese market.
One option is to target a more developed area as a way to get to know the country. An example is Hong Kong, with its sophisticated infrastructure, duty-free port, an abundance of suppliers and concentrated large population.
Consider Your Distribution Strategy
Consider the distribution strategy and look for partners with existing interests in China. Distribution options range from hiring local sales representatives to partnering with a Canadian firm that's already exporting or selling products in the region.
You may be limited by the need to stay close to your client, but if you have a broader choice, select a location with ties to your industry, such as the extensive export infrastructure in upgraded ports like Shanghai where high-tech industrial parks are plentiful.
Be aware that, like many countries, China's real estate prices and rent are on the rise. It's common to negotiate prices for everything, including water, electricity rates and hook-ups to infrastructure grids. Do this in advance or consider renting for short-term operations. Inland provinces like Sichuan offer attractive incentives to build, so that's something worth looking into, especially if you're marketing locally and don't need to be near a port.
EDC and BDC extend financing to Canadian businesses exporting to and from China. EDC sells credit insurance so you won't be left on the hook for unpaid bills from foreign clients.
Formal dress, deference to customers and higher-ranking individuals, and unique decorum are central to how the Chinese do business. It's a good idea to consult with a local host to ensure you understand the protocol.
Use these tips as part of your research on how to establish a business in China, and reach out to other Canadian firms to learn their secrets to success.