Business Intelligence in China

Today, China seems to be the redeemer of the European industry. If you ask around people are convinced that China is the future market for their products. But they are often not able to quantify their opinions. There are myths and dreams of unlimited markets and opportunities.

Especially SME with limited experience in China tend to overestimate the chances and to underrate the risks that come along with a market entry into China. It can be noticed that the market volume, development and access is often exaggerated. Why is this?

• In contrast to Europe, where market data is widely available, it is hard to find reliable statistical data for China. There are a lot of different statistics (i.e. statistical yearbooks of China and the separate regions, industry yearbooks, etc.) available. The given figures are exaggerated and a consistency between different sources is not given. According to the official statistics there are more then 150.000 active mines in China. From the European perspective there should be a huge potential for mining equipment such as scrapers, conveyers etc. The truth is that there are just very few relevant mines for equipment suppliers, because the majority of the active mines are very small and even the bigger mines are mostly operated manually.
• Even if the statistical data is correct there still might not be a market for imported products. Our experience is that the price level of Western suppliers is way too high for local companies. Some companies have to experience that the only market available is with subsidiaries of their Western customers in China.
• Some markets are still small, i.e. the market for hydraulic components. Yet, the chances for a strong development might be low because the Chinese prefer electrified machines in the future.
• If your target market is dominated by state owned companies they might not be willing to buy machines that improve productivity because they usually operate with a lot of employees and do not want to fire them.

These are just some reasons why companies misjudge the market chances in China. There are a lot of other reasons like different culture and customs (thriftiness, guanxi*, etc.) that have to be taken into account.

For the most companies China is a big chance if they prepare well and do not supersede the risks.

So before entering this exiting market make sure your expectations are based on solid business intelligence. Due to the given reasons it is advisable to seek professional support from an agency with experience in the Chinese market and business behaviour.

Power in Motion visit www.powerinmotion.info

*Footnote: Guanxi is the Chinese word for interpersonal relations.