Cracking into the Chinese market? Here’s what you should know

May 11, 2015
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For most of the past two thousand years, China had the largest and most complex economy in the world. Since the introduction of economic reforms in 1978, China has become one of the world’s fastest growing country. As of 2013, it is the world’s second-largest economy by both nominal total GDP and purchasing power parity, and is also the world’s largest exporter and importer of goods, which makes China one of the most attractive and dynamic country in the world.

In the past decades, the IT industry has grown drastically and has become one of the most innovative and competitive market in the world due to the fact that firstly, a huge number of startups are trying to make better products and more efficient business models; secondly, there is less product and brand loyalty, users are constantly switching products as long as there are advantages in user experience, cost, or design UI.

Therefore, you will see a lot of interesting business models and products in China that you won’t see abroad. For example, in China the most famous mobile chatting application, WeChat, has evolved to be much more than a chatting tool, and can also be used to pay for taxis, bills, loans and many more services. Another example would be Didi taxi and Kuaidi taxi. Two years ago, there were more than 200 taxi applications, today with the merger of the two biggest players, they have occupied more than 80% of market share.

Business model, user experience including rating system, “seize request” system and money-back offers have been hugely successful. One may ask, if I copy the exact same model, would I be successful as well?

Here comes the most important part of Chinese business: “guanxi” or relationship/connection when translated to English. In the Chinese business world, it is also understood as the network of relationships among various parties that cooperate and support one another. An understanding of the Chinese business etiquette is necessary to one’s success, as business in China heavily relies on relationships. When we discuss relationship, many outsiders may refer to “friendship”, which is merely partially true.

The core of the “guanxi” is profit sharing. You must ask yourself, “why would he help me?”, “how much should I pay for his help?”, and “if I do not pay him, is there any other resource I could give him?”. Keep this in mind and you’ll do just fine in China!

Photo credit: Thomas Depenbusch/Flickr

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