It’s hard to ignore China. This country, with the world’s biggest population that is 3.5 times the size of the United States, offers a remarkably large consumer market. In 2020, China was the only major economy to expand during the peak of the pandemic, recording a GDP growth of 2.3%. During this time, multiple brands seized this opportunity to open stores targeting the Chinese market. Many household Singaporean brands, such as BreadTalk, TWG Tea and Charles & Keith have already successfully expanded into China and have reaped the benefits.
Wanting to heed China’s beckoning and explore the opportunities this country presents is only natural. However, there are many aspects of Chinese culture and business practices that can be challenging for Singapore companies looking to set up operations here. In this blog post, we will discuss some of the steps that businesses should take when exploring opportunities in China.
Why should you be investing in China?
China presents innumerable opportunities for Singapore businesses. It is the world’s second-largest economy, totaling US$15.92 trillion in 2020. And it’s showing no signs of slowing down. China’s gross domestic product (GDP) is set to grow 5.7% annually until 2025.
Singapore and China have a strong existing partnership supported by the ASEAN-China Free Trade Agreement (ACFTA) and the China-Singapore Free Trade Agreement (CSFTA). These FTAs reduce tariffs and make two-way trade between the countries more liberal.
Some of China’s major industries include copper ore mining, building construction, real estate development and software development. Its staggeringly large consumer market size also makes it particularly attractive for companies in the retail, consumer and food and beverage (F&B) industries. A thriving e-commerce market is another reason for Singapore companies to start seriously considering China. The volume of e-commerce transactions is accelerating at an exponential rate – with China’s annual compound rate from 2020 and 2024 at 14%.
How should you start a business in China?
1. Pick the right location
Before you start making arrangements to set up offices in China, first decide on the city that offers your business the best perks. Free Trade Zones (FTZ) in established business hubs, like Shanghai, Fujian, and Guangdong, encourage foreign business and innovation. This makes it easy for a business to be set up here as the tax amounts are less, the process of office rental is less of a hassle and fewer administrative barriers are present.
Other cities like Yunnan and Chongqing have newer FTZs set up to connect the Belt & Road Initiative and the Yangtze River Economic Belt. Business hubs, like these, offer ready access to suitable talent, a network of business partners and logistics services – making selecting one a good springboard for your business.
2. Build strong relationships with local partners
Building strong relationships with your local business partners is the key to success in China. They can help guide you through the complex business landscape and provide valuable insights into doing business in China. It’s also important to make sure that you have a good understanding of the Chinese legal system, policies and regulations and how to navigate it. By engaging a global expansion partner – Professional Employment Organization (PEO)/Employer of Record (EOR) – you will be able to hire local Chinese talent and handle tax obligations easily.
3. Market with the Chinese buyer in mind
Selling to the Chinese market requires engaging them where they are. For every social media platform or communication application used globally, China has its own version. Instead of WhatsApp, it uses WeChat. Instead of eBay, it has Tmall, its largest online marketplace for retail customers. Instead of Instagram, Pinterest and Amazon, it has Xiaohongshu, “Little Red Book”, a uniquely Chinese social media and e-commerce experience that combines the features of all three. By understanding and using these platforms to sell and market your products, you will be in a better position to attract the Chinese consumer. You then can increase brand awareness and eventually become a top-of-mind product here.
4. Select the right payment solution for your e-commerce business
As you set up your e-commerce websites alongside brick and mortar stores, getting your payment systems up and running online should be one of your top priorities. Engaging a local Chinese bank could be a long drawn out process involving tedious paperwork and significant operational costs. Instead, explore digital payment options, such as plug-and-play platforms offered by fintech startups. These Platform as a Service (PaaS) and Banking as a Service (BaaS) platforms seamlessly integrate into B2B marketplaces, logistics, e-commerce enablers and traditional remittances, to provide a cost-effective, scalable and secure payment solution.
Opal’s cross-border payment solutions for SMEs
Venturing into China can be equal parts nerve-wracking and exciting. Opal (One account for Payment and Loans) is designed to support all your financing needs, from cross border money transfers to handling different currencies with a multi currency account. This single platform offers end-to-end banking solutions and provides a range of best-in-class financing solutions.
We also offer named accounts so that the name on your invoice and that of your account is aligned – making it easy for your customers and suppliers to remit payment to you. Unlike generic remittance houses, where the name of the account is that of the remittance provider. This makes sending and receiving payments easy.
Our all-in-one account fulfils all your financial-business needs and makes your journey into China a smooth one.