Navigator: Made for China survey charts international businesses’ ambitions to sell to China’s fast growing consumer market
International businesses are confident that the quality of their products will appeal to Chinese consumers, understand that distribution partnerships and e-commerce platforms are key to success in this market and are targeting the growing spending power of consumers aged under 40. These were among the key findings from HSBC’s first Navigator: Made for China survey, which was launched recently at the China International Import Expo in Shanghai.
“To succeed in the future, international businesses must be ‘Made for China.’ China is no longer just the world’s factory; its fast-growing consumer market is prompting international businesses to re-evaluate how and what they sell to China,” said Stuart Milne, Chief Executive Officer, HSBC Malaysia.
“While made-in-China goods are found in-store and online around the world, the rapid development of China’s economy means that Chinese consumers are shaping the strategies of international businesses. These companies need a new playbook: ‘Made in China’ is no longer enough; they and their products need to be ‘Made for China,’” said Stuart.
HSBC’s Navigator: Made for China survey explores the intersection of international businesses’ growth ambitions with China’s increasingly affluent and discerning consumers. In September, the survey canvassed the views of 1,205 small and large companies in 11 key global economies that already export to China or are considering doing so.1 In Malaysia, 100 companies were surveyed.
Partnerships and e-commerce platforms the way to go
Among respondents from Malaysian companies currently selling in China, 42 per cent identified partnerships and distribution agreements with local companies as the top factor that would drive their sales growth there.
Another 38 per cent of current exporters to China highlighted being able to provide distinctive and superior products and services (38 per cent) and the widespread usage of sales and e-commerce platforms in China (36 per cent) as key catalysts for their companies’ sales growth. Both partnerships and the usage of e-commerce platforms are significantly more important for Malaysian businesses than they are globally.
What Chinese consumers want
According to government estimates, China is going to import US$8 trillion worth of goods in the five years from 2018 to 2022. That is equivalent to an average of US$1.6 trillion a year, which is about the same as the gross domestic product of Canada or South Korea in 2017.
China’s increasingly powerful consumers are focused on quality, innovation and convenience, our Malaysian respondents believe, indicating that Chinese customers look for quality and safety (44 per cent), technologically advanced and innovative products (33 per cent) and convenient access to products and services via digital or e-commerce platforms (31 per cent) when they make their purchases.
International businesses also believe that technology-related products and services will achieve the fastest growth in China, reflecting the sophistication of Chinese consumers and their demand for products that can enhance their lifestyle.
In Malaysia, 42 per cent of respondents said that exports in the technology services sector (such as information technology, biomedical technology, big data and artificial intelligence) would grow the fastest. Consumer electronics (35 per cent) and food and agriculture products (27 per cent) were also identified as expected leaders in export growth to China.
Millennials, platforms and partnerships
Most businesses we surveyed said Chinese consumers aged under 40 today will drive Chinese consumer demand for years to come: 38 per cent believe that those born in the 1990s will provide the strongest sales growth, while 30 per cent believe that growth will come from those born in the 1980s and another 23 per cent believe it will be driven by those born in the 2000s.
Malaysian businesses already selling to China identify the importance of having both a physical and an online presence to reach their target consumers. The strategies most commonly used to access the Chinese market are developing local distributor networks (62 per cent), entering into joint ventures (60 per cent) and selling directly via e-commerce and m-commerce (58 per cent).
The importance of e-commerce to the under-40 demographic is clear. These consumers have grown up alongside the phenomenal expansion of online shopping platforms, which recorded sales of over US$1 trillion in 2017. Businesses in Asia-Pacific and North America in particular see e-commerce platforms as key to connecting with consumers.
Challenges and solutions: how businesses can be ‘Made for China’
The need to customise products and services to meet Chinese market needs (40 per cent) was identified as the top challenge faced by Malaysian companies already selling to China. Allowing more time for compliance with local regulations and understanding the local business culture (both 36 per cent) were seen as further challenges.
The top three challenges for Malaysia companies considering selling in China are competition from international companies (39 per cent), adapting to Chinese tastes and lack of market knowledge (both 35 per cent). Businesses are looking to overcome these challenges by improving their own distribution network or distributor relationships (42 per cent), setting up local partnerships (40 per cent), and increasing the usage of e-commerce platforms (38 per cent).
About Navigator: Made for China
HSBC’s inaugural Navigator: Made for China report surveyed 1,205 businesses with turnover of $5m-$50m USD turnover from 11 key markets globally, including: US, UK, Singapore, Malaysia, Australia, Hong Kong SAR, UAE, Germany, France, Canada and Mexico.
Survey respondents were key decision makers from businesses already or considering selling and exporting to China. The survey gauges future growth drivers of trade to China, strategies and sales channels as well as fast growing sectors and consumer generations.
To download the report, please click here.