China topped the list as the largest economy on earth in 2016, according to Purchasing Power Parity basis, which considers price differences.
"China became the world's largest exporter in 2010, and the largest trading nation in 2013", according to the CIA World Factbook.
It's no wonder why eCommerce businesses around the world want to get into this massive market. However, doing so successfully has its challenges.
Hurdles for Ecommerce Business Looking to Enter China
1. Administrative Red Tape Costs Time and Money
Although the Chinese government has made some significant efforts to streamline its processes and procedures for foreign businesses, the amount of bureaucracy that still exists is high.
Standard documents required for most exports to China include a shipping list, bill of lading, insurance policy, customs declaration, invoice, and sales contract.
Some products might require an import quota certificate, inspection certificate, import license, and safety or quality licenses.
Since China is geographically diverse, roughly eight different ministries regulate and inspect imports, particularly food imported into the country.
Each of these agencies has its own regulatory requirements in terms of food safety, packaging, storage, labeling, quality, and record-keeping.
Recently, new laws regarding food safety, infant formulas, health foods, and special foods for medical use have been decreed, which means more requirements for you when you want to sell online in China.
Red tape is also mounting in the information communication technology arena.
Since China's long-term goal is to replace all foreign communication technology with China-made products, the country is creating many more restrictions on foreign communication technology products and services.
Government officials are requiring that foreign products be secure and controllable.
With that said said, the World Bank reports China ranking 46 out of 190 countries in its Ease of Doing Business Report, an improvement over previous years and its first time in the top 50.
2. Preferential Treatment Given to Domestic Enterprises
China is understandably invested in government-run enterprises as well as domestic manufacturers and producers.
As a result, many of the country's policies limit access to Chinese markets for foreign businesses while providing a great deal of support and assistance to Chinese enterprises. State-owned organizations, as well as government officials who have a vested interest in the success of domestic enterprises, stand to benefit.
Certain exceptions are made in some areas if a foreign business agrees to transfer certain technology, contribute to the local country's research and development efforts, or provide another significant benefit to China by exporting products and services to the country.
3. 3PL Faces Challenges
Efficient and effective logistics is a key to successfully exporting to China. Many businesses work with 3PL companies based in China, and these organizations are facing increasing challenges.
Although labor costs are still relatively low when compared with the rest of the world, the sea ports of Shenzhen, Shanghai, Guangzhou, and Tianjin are seeing their local pay increasing significantly.
That means 3PL companies bear rising labor costs. In addition, China's economy has been slowing down during the last two years, which has increased competition for 3PL enterprises.
In many cases, 3PL organizations are still using labor-intensive, inefficient, paper-based systems, which require significant training.
Although seasoned logistics professionals are valuable, many younger professionals who have grown up immersed in technology fail to embrace old-fashioned business systems. As a result, they become bored and move onto more fulfilling professions.
Some 3PL companies have tried to relocate to lower-wage areas; however, this decentralization brings its own set of challenges.
This makes it extra important for the would be foreign ecommerce seller operating in China to have a seasoned logistics partner like Fulfillment Bridge as their 3PL and ecommerce fulfillment provider.
4. Language and Culture Navigation Difficult
Business etiquette, expectations and relationships are significantly different in China compared with western cultures.
In the United States, business relationships are typically done by contracts and, in recent years, can be successfully negotiated and completed with little or no face-to-face interaction.
This stands in stark contrast to China's business practices.
Nearly all business relationships are nurtured through one-on-one, face-to-face relationships. Trust is built over time, and someone's verbal word is worth much more than a signed contract.
A handshake in China can mean as much as a 10-page contract that has been meticulously examined by corporate attorneys from negotiating businesses.
Without a local presence, an intermediary, or at the very least, a translator, businesses will find exporting to China extremely difficult.
5. Gifts: A Double-Edged Sword
Although Chinese business professionals frequently practice guanxi (关系), or the local custom of giving meals, gifts or favors as part of networking and relationship-building, the same practice is not necessarily interpreted the same way for foreign businesses.
Gifts given by foreign entities may be considered as bribery and therefore subject to national and international anti-corruption laws.
As a result, foreign companies may find themselves in a catch-22, where the lack of gifts can hamper relationship development but the giving of gifts can violate national laws. Unfortunately, these laws are not always consistently interpreted or enforced.
6. Finding and Securing Customers
Just as cultural and language barriers can negatively affect business relationships, they also pose challenges for marketing to Chinese customers.
Reaching a target market can be a challenge for an exporter, and those middle businesses designed to assist can present additional difficulties.
Some major cross-border companies have such a huge monopoly on the market that there is immense competition as well as outrageous management fees.
Other organizations are complex in their requirements and difficult to work with. Establishing an independent marketing effort can take a great deal of time and money to do it effectively. And, remember, most Chinese consumers are buying goods on their mobiles using apps like WeChat for everything from payment to customer support and tracking delivery.
There are some companies that help ecommerce sellers entering the Chinese market to get set up, a few include:
China is an attractive market for foreign enterprises, and the potential reward may outweigh the risks and challenges of doing business in this country.
However, as labor costs increase, the local economy slows down, and regulations increase, exporting to China will take a greater investment and more forethought in many areas to maximize business success in this export market.
After the Checkout: Make Shipping Easy on Yourself with the Help of Fulfillment Bridge
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