Asiatic Sourcing Blog

Overcoming the SME Hurdles of Doing Business in China

Although experiencing a slowdown in some sectors, China manufacturing has just reached a two-year high. HSBC’s January index figures showed a rise to 51.9 from December’s showing of 51.5. Anything over 50 indicates growth.

This booming nation continues to draw an ever increasing group of businesses and entrepreneurs seeking to set up shop, especially since the government is continuing to make the business atmosphere more appealing to such investments. This is an ideal time to jump on the bandwagon and relocate shop or set up branch businesses there. Not only can China products be manufactured cheaper in the country for export to those who buy from China, but its own middle class is growing, making better wages, and spending more money internally as well.

Barriers to Doing Business in China

The problem is that a majority of SMEs (small and medium enterprises) find making such a move daunting due to the numerous barriers entailed with breaking into the Chinese market.

For one, managers need to be deployed in order to find qualified China sourcing vendors to do business with. This isn’t always a welcome option for small to medium businesses because they operate on limited resources. Sending valuable management away on business trips for weeks or months just isn’t appealing.

There is also the problem with the time and finances required to move or establish a branch as well as recruit staff. Again, this isn’t a readily available option for SMEs that are already struggling with a stagnant economy, tighter bank loan restrictions, and heftier competition.

How SMEs Can Break Into the Chinese Market

One way for small and medium sized businesses to get started in the country is to partner with local businesses already in operation. Although this option provides an established business and existing working personnel, it also has its challenges with language barriers, customs differences, management problems, etc.

Another advantage that SMEs have is that they often belong to national trade associations that can assist them with breaking into China manufacturing or other business sectors. Trade organizations can do a great deal of the footwork like create shortlists of possible vendors, link your business with a shared Chinese facility, assist with contract negotiations, ensure the quality of produced goods, help monitor suppliers, and more.

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