By Josh Morrison.
China is a highly important business landscape for many businesses based in the United Kingdom. Even those thinking of avoiding entering the Chinese market as sellers, cannot ignore the fact that Chinese companies are going global too. In order to “stay in the game”, every company must be aware of the large role the Chinese market plays in terms of global sales.
In this article, I will illustrate the current business environment in China from a UK-based perspective – focusing on both opportunities and challenges.
According to the UK Department of Trade and Industry, China accounts for 6.9% of total UK trade (2022). This positions China as the UK’s third-largest trading partner for imports, and as the sixth-largest market for export.
What Are the Drivers of the UK-China Business Relationship? There are several. For starters, China is the world’s second-largest economy, and the UK is not alone in wanting to participate in the ample business opportunities this vast country presents. Due to the UK’s withdrawal from the EU, countless UK businesses are looking for new trade partners. Therefore, it is not surprising that China’s thriving economy possesses such significant appeal.
A report from the Confederation of British Industry (CBI) states that China is the UK’s second-fastest-growing export market. The UK-China Business Council identifies over 9,000 UK businesses operating in China – an unprecedented number. We can expect these numbers to keep growing due to the trade agreements signed by China and the UK, which are proactively backed by their respective governments.
Optimistically Cautious – Illustrating the Challenges
No opportunity is without challenge. UK companies that open a branch in China must brace themselves for a myriad of challenges. The most obvious challenge is adapting to a completely new culture, but that’s not all. According to the latest Sentiment Survey published by the British Chamber of Commerce in China, British businesses face three main challenges in 2022-23: Employing foreign staff, business environment transparency, and the navigation of cybersecurity and IT regulations.
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Opening Up to More Business
Challenges are meant to be overcome, and while they do exist, there’s ample room for optimism when examining China’s business landscape.
In January 2023 China decided to bid farewell to all Covid restrictions. This has made moving around in China as well as traveling to China much easier, and has placed less strain on the country’s bureaucratic mechanisms.
Another recently unleashed strategy that benefits international companies is China’s increased investment in tech-related sectors such as AI, automation, and various areas that involve R&D. 2023 sees China investing in 39 new sectors that in one way or another involve the automotive industry, green energy, or cutting-edge manufacturing.
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Hiring foreign staff has become a major issue since the start of the Covid-19 pandemic. According to the Sentiment Survey, the main reason for the difficulty in recruiting foreign staff is the lack of business certainty felt throughout China. That said, China was on a journey to redefine and update some of its regulations concerning hiring staff even before the pandemic started. With growing local talent and many returning home after being educated abroad, China wants to make sure doors remain open for their own citizens, as well. This is a natural process that occurs in mature and developing markets all around the world.
Hiring local staff might be just as challenging though, especially when executed by British companies that aren’t well-versed in the local culture, and may not be fully aware of what local employees look for in prospective employers. Competition for talent is growing too, and many companies that have experienced recruiting errors – or were unable to recruit the right employees – paid a grave price in terms of time, money, and business setbacks. This can be avoided by working with the right local partner, which can provide a better understanding of local practices and help with recruitment and HR processes.
China has invested vast resources in innovation, and this has great appeal for international companies. But there are two sides to every coin. Alongside high digitization, businesses operating in China must comply with heightened legislation regarding cybersecurity and data protection. This legislation includes laws pertaining to personal information protection and data security, which must be followed by every business operating in China, regardless of size.
What does this mean for UK-based businesses? Well, to start off, they must understand that they need to comply, or else they will be breaking the law. Compliance means investing in the appropriate cybersecurity infrastructure and staying up-to-date on local regulations. If your company has already experienced the GDPR regulations compliance process, then this should not be a foreign practice to you. It will require adjustment and ongoing work, but there should not be a reason for you to not be able to comply with these rules.
China has made it abundantly clear that it wants to attract foreign companies. From the national government to local institutions, places of influence are executing a variety of policies that benefit foreign companies. As a result, many companies entering China may be able to enjoy special loans, lower import duties, and more. This may be an ideal time to plunge into China’s business waters.
Thinking of Entering the Chinese Market? It’s Best Not to Go at It Alone
Managing a business operation in a foreign territory is always complicated, and China can definitely be a challenge for companies based in Europe and the UK. Partnering with a professional team with years of hands-on Chinese market experience can be the difference between successful market entry and unnecessary drawbacks.
PTL Group offers a wide range of business support services that are customized to the dynamic needs of UK-based companies looking to establish a presence in China. The company’s UK office supports dozens of UK companies throughout their development in China. This support includes navigating through the challenges experienced in China, from top talent recruitment and operational transparency to complete financial and digital compliance. For more information, please visit us here and don’t hesitate to contact me at Uklead@ptl-group.com