Op­por­tu­ni­ties in China for Aus­tralian SMEs

De­spite the well-pub­li­cised eco­nomic slow­down that con­tin­ues in China, the mar­ket still presents sig­nif­i­cant op­por­tu­ni­ties for Aus­tralian SMEs con­sid­er­ing growth into Asia writes An­drew Wat­son.

Business First - - ASIA - An­drew Wat­son is Ex­ec­u­tive Di­rec­tor, Ex­port Fi­nance, Efic.

G row­ing an ex­port busi­ness can be daunt­ing but there are a num­ber of steps that SME ex­porters can take to en­sure their tran­si­tion into the Chi­nese mar­ket is as smooth as pos­si­ble.

Iden­tify the op­por­tu­ni­ties

China is Aus­tralia’s largest ex­port mar­ket and now buys al­most a third of Aus­tralia’s ex­ports. Aus­tralia ex­ported A$90 bil­lion of goods and $8 bil­lion in ser­vices to China in 2014, a huge vol­ume that was met by Aus­tralian busi­nesses in a wide range of in­dus­tries.

While China’s econ­omy has slowed over the last 18 months, the out­look for pri­vate con­sump­tion re­mains solid, with the coun­try’s grow­ing mid­dle class con­tin­u­ing to of­fer sig­nif­i­cant new ex­port op­por­tu­ni­ties for Aus­tralian busi­nesses.

Min­ing, agriculture and ser­vices are three of our most im­por­tant ex­port mar­kets to China. With a grow­ing pop­u­la­tion and strong de­mand from the man­u­fac­tur­ing and con­struc­tion sec­tors, China can­not meet its grow­ing do­mes­tic de­mands for en­ergy. Iron ore and con­cen­trates, coal and gold are our big­gest ex­ports to China, and Aus­tralia is also one of China’s largest sup­pli­ers for bauxite.

China is the largest im­porter of Aus­tralian agri­cul­tural pro­duce, a re­la­tion­ship that was worth $8.5 bil­lion to our agri­cul­tural sec­tor in 2014. Strong pop­u­la­tion growth and ris­ing per capita in­comes will mean de­mand for agri­cul­tural prod­ucts will likely con­tinue.

Dairy in par­tic­u­lar is ex­pected to be­come an in­creas­ingly im­por­tant mar­ket seg­ment, of­fer­ing high re­turns to Aus­tralian farm­ers.

In the ser­vices sec­tor, a bur­geon­ing Chi­nese mid­dle class means a grow­ing de­mand for ser­vices such as ed­u­ca­tion, for which Aus­tralia is in a strong po­si­tion to de­liver. An age­ing pop­u­la­tion is also cre­at­ing an at­trac­tive mar­ket for aged care ser­vices.

As­sess the risks

As with any for­eign mar­ket, there are some unique chal­lenges to do­ing busi­ness in China.

Aus­tralia’s In­ter­na­tional Busi­ness Sur­vey 2015, spon­sored by Efic, asked over 1200 Aus­tralian in­ter­na­tional busi­nesses what they be­lieve are the most dif­fi­cult bar­ri­ers to do­ing busi­ness in China.

One of the key chal­lenges iden­ti­fied was the lo­cal lan­guage, which can be an in­hibit­ing fac­tor for Aus­tralian busi­nesses seek­ing to es­tab­lish re­la­tion­ships. Em­ploy­ing the ser­vices of a lo­cal trans­la­tor can be a huge help for Aus­tralian SMEs look­ing to do busi­ness in China.

Un­der­stand­ing lo­cal reg­u­la­tions was also iden­ti­fied as a chal­lenge when en­ter­ing the Chi­nese mar­ket. The World Bank’s ease of do­ing busi­ness gauge – which at­tempts to mea­sure lo­cal reg­u­la­tion rel­e­vant to SMEs – ranks China 96th out of 189 economies around the world.

China ranks the low­est on ease of reg­is­ter­ing prop­erty and en­forc­ing con­tracts, so these are im­por­tant con­sid­er­a­tions for any SME en­ter­ing into a con­tract or com­mer­cial op­er­a­tion in China.

Plan and pre­pare

For these and any other po­ten­tial risks iden­ti­fied in the Chi­nese mar­ket, there are steps SMEs can take to pre­pare and set them­selves up for suc­cess.

Es­tab­lish­ing strong net­works is cru­cial for all SME ex­porters – when ex­port­ing to China, they are a par­tic­u­larly im­por­tant method of ac­cess­ing valu­able in­for­ma­tion and sup­port.

One great way to do this is through es­tab­lished fo­rums and net­work­ing groups. The Aus­tralia China Busi­ness Coun­cil pro­vides in­for­ma­tion, pro­grams and op­por­tu­ni­ties for the Aus­tralian busi­ness com­mu­nity to net­work on China busi­ness ac­tiv­i­ties, as well as host­ing events with se­nior con­tacts within the Chi­nese govern­ment.

Another im­por­tant step is tak­ing the time to un­der­stand the lo­cal busi­ness cul­ture in China. For ex­am­ple, es­tab­lish­ing strong re­la­tion­ships and trust is cru­cial be­fore clos­ing any deal – of­ten this takes place over a se­ries of lunches and din­ners. Another tip SMEs of­ten over­look is that it is re­ally use­ful to have busi­ness cards printed in Chi­nese.

Fi­nally, seek ad­vice. As with any busi­ness ven­ture, re­ceiv­ing good qual­ity le­gal, tax and pro­fes­sional ad­vice is crit­i­cal be­fore mak­ing im­por­tant de­ci­sions; use a le­gal firm with a lo­cal pres­ence to en­sure you com­ply with lo­cal reg­u­la­tions and laws. They can also high­light any con­tract is­sues and be able to help if you are con­cerned about pro­tect­ing your in­tel­lec­tual prop­erty.

En­joy ex­port suc­cess

China of­fers ex­cel­lent op­por­tu­ni­ties for Aus­tralian SME ex­porters across a range of sec­tors.

As with all ex­port de­ci­sions, get­ting the right in­for­ma­tion and mak­ing the right con­nec­tions can be dif­fi­cult. How­ever, fol­low­ing the steps out­lined here should help your busi­ness over­come the ex­port bar­ri­ers and es­tab­lish a se­cure ex­port busi­ness in China.

For more in­for­ma­tion on ex­port­ing to China and fur­ther in­for­ma­tion about ex­port-re­lated fi­nance, please visit Efic’s web­site to down­load a free eBook for SMEs on this topic, Ex­port­ing to China.

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