Comments
Prospects in China often look far more attractive to foreign executives looking at China from the West or making short visits to the country than they do to the business people living in China, writes Chris Torrens in Doing Business in China: A Guide to the Risks and the Rewards ( www.vivagroupindia.com ). “Even in the 1830s, British employees of the East India Company based in the southern city of Canton (modern-day Guangzhou) were in constant dispute with their British head office over the viability of much of their traded goods,” he notes.
Among the early examples of the lure of Chinese markets, cited in the book, is the observation of an English merchant in the mid-19th century that if every person in China could be persuaded to lengthen his shirttail by a foot, the mills of Lancashire could be kept working around the clock. Another example is of the US Farmers' Association which, in the 1930s, dreamt of ‘selling an apple to every Chinese'. Today, more than two-thirds of foreign firms operating in China are believed to be profitable, though tax records indicate that only one-third make a profit, the author reports. “This suggests that some companies may be concealing their profits.”
Counterfeit conundrum
A section on ‘protecting intellectual property' rues that within China well over half the consumer goods in daily use are believed to be counterfeit. The author explains that, despite a marked improvement in legislation in recent times, the enforcement bodies in China lack the funding, credibility and incentive to act against violators.
“Entire villages and communities may be employed in the manufacture of certain counterfeit products, with the local area monitored by surveillance cameras and patrolled by guards, and local residents wary of any outsiders who might threaten the factory that is providing employment … It is not surprising, then, the local enforcement teams attempting to raid factories in such locations are forced to retreat in the face of hundreds of angry residents prepared for physical violence.”
Patchwork of markets
A chapter about ‘assessing the market' portrays China as ‘a patchwork of markets with all the variety of the European Union' in terms of culture, language, business practice, operating cost, and consumer income and behaviour, which can vary hugely from region to region.
Cities and their populations are changing at a bewildering speed, affecting all the market categories, observes Torrens. He adds that the surfacing of a middle-class and China's growing integration with global consumer trends have seen the emergence of a younger generation that shares more similarities with the Asian and global counterparts through popular culture than any other consumer segment in the country's history.
Successful foreign brands understand the local market and accordingly offer products, as evident from examples such as L'Oréal and KFC. In the case of KFC, the author mentions how the company localised by selling ‘youtiao, a typically Shanghainese breakfast dish made from deep-fried twisted dough, Beijing Duck-style chicken rolls, Cantonese-style pumpkin congee, and gongbao jiding, a spicy Sichuanese chicken dish'.
To number-crunchers who are busy dissecting China's retail sales data, the author's advice is to take the data with particularly large grains of salt, because of two reasons. “First, in a hangover from the old Marxist accounting system, retail sales include non-consumer spending (notably government purchases and wholesale spending) but exclude spending on services. Second, retail sales data are typically estimated on a nominal, rather than a real basis.”
Educative read.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.