China may be a difficult market in which to gain a foothold, but those firms adventurous enough to give it a try are finding that its booming economy offers bountiful opportunities.

China is one of the world’s most rapidly growing economies, making it well worth a visit for potential exporters. From being a primarily agrarian economy 30 years ago, China now makes 25 per cent of the world’s washing machines, 50 per cent of its cameras and 90 per cent of toys. In the last decade alone, the country’s GDP has increased by almost 10 per cent each year, and it has built enough roads to loop around the equator 16 times.
The World Bank recently predicted that the Chinese economy would expand by as much as 10.4 per cent this year, and although it is not an easy market to tackle, British companies have much to gain from being courageous and capitalising on opportunities there. For the businesses that can get to grips with the sheer size of the country, language barriers and unfamiliar business culture, the potential is huge.
One North West company that can testify to the advantages of persevering in China is Polartech, based in Trafford Park. The company is one of the biggest worldwide providers of metalworking and lubricant fluids for suppliers to the engineering industry, with over 70 per cent of its business coming from the export market.
Polartech began dealing with China 12 years ago, and its managing director Hugh Dowding acknowledges that building up business there can take a long time. Initially it dealt with customers in China (many of which were European businesses that had migrated there) directly. However, the company quickly found a distributor in the country – a move which Dowding believes has been essential in winning new accounts with local businesses.
Polartech’s Chinese business is now booming, and Dowding eventually expects 40 per cent of Polartech’s revenues to come from Asia. It has recently taken the step of setting up a representative office in Suzhou and is in the process of building a new plant there, which is likely to become its biggest manufacturing base within five years
“The new factory we are building will be our largest ever investment, and will also service Korea, Taiwan and Japan,” says Dowding. “There’s no doubt that operating in Asia is a long-term commitment and businesses can’t expect to make one visit and start trading immediately, nor can they deal with Asian businesses by email.
“Deals in China are built on trust and personal relationships – you need to visit the country and meet people face to face. It can take up to five years to build good contacts, but it is definitely worthwhile.
“Polartech decided to build a factory in China because we wanted to show a commitment to the country. It is not necessarily the case that it is cheaper to manufacture there, in fact our raw materials are cheaper in Western Europe, but there is a psychological element that is very important and, of course, it makes the supply chain faster for our Chinese customers.”
Mr Dowding acknowledges that the cultural differences can be difficult to get to grips with, but says they are not insurmountable. “There are huge variations even between the different regions in China, and it would be impossible to understand them all,” he explains.
“However, the Chinese are more forgiving of misunderstandings from ‘foreigners’ than they would be from their countrymen. If you have one or two staff who can speak Mandarin, as we do, they are delighted because they have no expectation of Europeans being able to speak Chinese, whereas they would require Asian partners to use the correct dialect as well.”
Another company enjoying success in the Chinese market is Photolink Creative Group, also based in Manchester. Photolink is a marketing agency working with brands such as Kangol, Argos, Littlewoods and River Island, providing design, photography, new media and PR services.
Following the appointment of Claire Robinson as China Business Director earlier this year, Photolink is well on its way to cementing several successful relationships in China. It has also recently helped both Leicester Tigers Rugby Union Club and Manchester City FC to develop their brand profiles in the region following overseas tours.
Claire, a Mandarin speaker, previously worked at the International Trade Centre in Manchester advising North West businesses wishing to export to and import from China, and as the regional manager for the China-Britain Business Council, part of her role involved developing trade links between the two countries.
Claire lived in China for eight years and her experience has brought an understanding of the business environment and the culture. “There are huge opportunities for UK companies in China as demonstrated by the inroads that Photolink has made into the market in such a short period of time,” she says.
But, like Dowding, she emphasises the point that businesses cannot expect immediate results. “Entry into the China market requires a long-term approach. You need to make a commitment to the market and build lasting relationships in order to succeed. An understanding of the culture and a willingness to invest in these relationships can reap results, but it is a very complex market and you need to do your research.”
Claire also emphasises the value of trade missions such as those organised by UKTI and Chamberlink, adding that: “Establishing good business contacts, or ‘guanxi’ as it is known in China, is very important. This is true not only for commercial, but also for government contacts, and the missions are very useful in providing business leads and introducing companies to the right people.”

DOING BUSINESS IN CHINA - A PROFILE FOR SUCCESS
(Taken from UKTI’s China Business Guide, available on UKTI’s website, www.uktradeinvest.gov.uk)
How do you tackle the Chinese market? The following points illustrate the type of approach that companies prospering in China often take.
* Leave your pre-conceptions at home
* It’s all too easy to be dazzled or overawed by China, but keep hold of your business sense as tightly as you would anywhere else
* Do your homework on the market and potential partners
* Patience is a virtue. Some things may take longer to set up than you think (especially if they involve bureaucracy), so allow for this in your preparations
* Take a long-term approach, but don’t stick rigidly to your plans. Things often change rapidly and unexpectedly in China
* Obtaining good quality independent legal and professional advice is essential
* If your product is in danger of being copied or counterfeited, seek specialist legal advice on how best to protect your intellectual property rights
* Don’t forget to carry out due diligence

September 2006

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