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Where will you find prosperity in 2013?

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Where will you find prosperity in 2013?

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CHINA IS NOT JUST FOR THE BIG BOYS ANYMORE. As the ‘recession’ in the UK continues, more small and medium-sized enterprises will be forced to go international to grow their business and they should not shy away from China, assuming it to be too big or too distant for the likes of them.

Indeed, for a growing number of SME business owners and entrepreneurs, the conversation about China has moved beyond the strategic decision whether they should go there, to more tactical issues such as: How do I reduce the risk of market entry? How do I make sure I get paid? How do I ensure the quality of services and goods? And how do I protect my product from being copied?

Indeed, such practical points were some of the key issues addressed in a recent series of expert panel discussions on “Selling into China.” held recently in the US (sadly not in the UK). It’s the same here in the UK of course though we benefit from some advantages over our US competitors which we are still failing to appreciate and take advantage of; US protectionism, historical enmity between the US and China and the poles apart they are in business culture, to name but three.

So what does China offer the smaller UK businesses in 2013?

Despite its outsized challenges and a recent slowdown, the Asian giant is still posting strong growth rates — slightly more than 7% for 2012 and improving again in 2013 as the rebalancing of the market continues — compared with the pitiful performance of the UK and our closest EU markets. And, it is still worth remembering that we are still in the early days of China’s boom period which most experts predict is here to stay.

China is in the process of making a transformation from a producer economy to a consumer economy. As a result, with a population of 1.3 billion, there’s an enormous and increasing demand for Western products and services particularly those delivering novelty, efficiency, innovation, quality and luxury.

“Anyone who has a product or service they can sell is ripe for entering the market,” said Steven Henning, a specialist in international accounting and partner-in-charge at Marks Paneth&Shron LLP, at the recent US discussion. Henning was part of a panel speaking to a standing-room only crowd of local businesses and this hi-lights where the US (and many other countries) are leading the UK – their smaller business’s interest and hunger for this massive new market. And not surprisingly, smaller businesses, with smaller budgets, are interested in the more practical issues of China market entry.

In essence, it is generally accepted that there are basically three ways to sell into China: direct sales, the most difficult way; hiring a distributor or sales agent; or a joint venture. All three require an international sales contract that outlines everything from what currency you will be paid in, to how disputes will be resolved. Having said that, the key is to plan in such a way as to avoid disputes and this is where specialist help, such as from CME Associates, is required at the outset.

Intellectual property is another dominant legal theme in any discussion of doing business with China. China does have comprehensive trademark and patent laws in place and businesses can register their trademarks and patents there. However, the level of enforcement is another thing but there continues to be progress in this area too, not least because of the very large corporations who have fallen foul of copyright infringement in the past and more and more domestic China companies enforcing their intellectual property rights, which is a very encouraging sign in itself. Still, businesses should take some practical precautions to prevent their ideas or products from being copied or stolen. For example, a company might arrange having certain components made in one place, other components made in a second location, with assembly taking place in a third.

Perhaps the biggest foreign trade issue for smaller businesses is how to make sure they get paid. While proper vetting of sales partners and a solid contract are good places to start, there are also some currency strategies that can help mitigate the risks. The Chinese government has been loosening foreign restrictions on its RMB since 2010, as part of efforts to promote the RMB as a reserve currency and today the RMB is fully trade-able.

All in all, China is open for business and smaller UK companies should not be deterred from entering it. The key is to do so with the help of someone who knows how and on the basis of information that can be trusted. In China it is still very much the case that who you know is more important than what you know. Finding the right people is helped by knowing the right people and again, this is where specialist services like CME Associates, with people on the ground in China, are invaluable. UKTI and CBBC are useful for their depth of information and assistance in strategic planning, but when it comes to actually entering the market and the practical steps needed, then it is the specialists who come into their own, able to where government backed services cannot.

So when it comes to success in China for UK’s smaller businesses, the issues are known, the solutions are available and the risks can be minimised. What are you waiting for?

To discuss your entry into China, contact Philip Bell. Managing Partner of CME Associates philip@cmea.eu

Click here for more information about CME Associates

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