In the UK, SMEs account for 60% of UK private sector employment, and in China 80%. They are the lifeblood of any economy, creating and innovating in a way that many of the large cap companies simply do not. Strangely, and wrongly, SMEs in the UK are often overlooked. Many struggle to compete and realise their full potential.
As growth in the EU remains virtually flat, UK SMEs have been savvy and proactive in seeking new trading partners among the emerging economies, such as China, in order to grow, diversify and internationalise their customer base. UKTI has played a key role in that. A quarter of UK SMEs now view China as an area of business growth, which outweighs that of the other BRIC nations (Brazil, Russia, South Africa and India). It is a positive sign that UK international expansion into China has not been left only to large multinationals.
Despite a slowing rate of overall growth, China remains a highly lucrative market for web-based SME opportunities. Forrester Research, which specialises in business technology, forecasts that China’s e-commerce sales will reach US$1 trillion by 2019 – more than that of Britain, France, Germany and the US combined. It is possible that China may exceed this figure, driven by government support.
The recent move by the Chinese Government to allow full foreign ownership of some e-commerce businesses is aimed at encouraging foreign investment and the development and competitiveness of the industry. China has also released new guidelines to improve customs procedures for e-commerce, a major move which will boost cross-border transactions.
Now that China’s economy is growing at around 7%, its slowest pace in decades, the government is seeking ways to shift growth away from an over-dependence on low-cost manufacturing towards higher-value services and consumption. These developments represent good opportunities for UK businesses seeking to enter, or increase their exposure to, e-commerce in China.
If you are an entrepreneur looking to establish your SME in China, my advice would be to stay patient and have a long term plan. The more time you take to research the market or potential partners, and build those fruitful relationships, the greater your chances of success.
Remember, what works over here in the UK may not necessarily work in China. Companies need to adapt to the domestic market and local tastes. There is a good reason why Domino’s Pizza sell rice dishes as an addition to their pan-global pizza menu. Similarly, there is a good reason why KFC sells more than just chicken, but also soy dishes, wraps with local sauces, and different spices to suit different regions. You do not need to be a sinologist to do business in the country, but understanding the diversity and markets of China will give SMEs a huge advantage.
As China moves to become a more consumer-led economy, e-commerce is taking off, and with supportive Government policies encouraging foreign investments, UK SMEs can play their part in China’s e-commerce evolution.
There are some good organisations in the UK which can help UK SMEs to enter China, such as UKTI and the China Britain Business Council (CBBC). The latter has a section on its website dedicated to SMEs, including case studies, reports and interviews with UK businesses that have successfully established themselves in China. I strongly recommend taking a look. CBBC also has an extensive network of offices in both the UK and China that are exceptionally helpful for SMEs.
By Patrick Tsang, executive director of GNet Group plc, an e-commerce company based in China.