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Trading with China: Practical tips and resources for farmers

Jez Fredenburgh 14 December 2017
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Three weeks in China was enough to see that the country offers UK food producers and companies huge export opportunity – not just because it is a vast and rapidly developing market – but because there is a real appetite for safe, good-quality food and drink with a story to tell.

But making a success of it is not for the faint-hearted or those looking for a quick buck and, in fact, holds risks that must be approached with care.

To do business in China, you must understand a varied market, overcome a complex and changing regulatory environment and maintain strong relationships with the right people.

A great deal of this must be done in-country, in Mandarin and over several years. That’s a lot of long-haul flights, large dinners and payments to interpreters.

See also: Video: Why China offers UK farmers opportunity

It also requires a different approach. For example, before travelling to China I did the British thing and tried to nail every meeting date, time and agenda before I left.

This proved fruitless and stressful because Chinese people are all about “saving face”, which means they don’t like to overpromise something if there is a possibility they won’t be able to deliver on it – including meetings.

Many people also do not respond to emails, especially if they have not been introduced through a mutual acquaintance.

Once I was there, however, things moved very quickly and invites started flooding in, including with people I had not contacted before leaving.

Downloading China’s main social messaging app, WeChat, was critical as meetings were organised via this and often on the day. It is also a way of being introduced to other contacts and helps to build relationships.

But patience, good understanding, and determination can pay dividends in China.

And, thankfully, UK producers have a lot of highly skilled and well-connected people and organisations working here and in China to open up opportunities and provide support.

Jez Fredenburgh travelled to China courtesy of the Perkins Global Innovation Scholarship, run by the British Guild of Agricultural Journalists. Farmers Weekly had full editorial control.

‘Start small and ask for support early on’

Karen Morgan

Karen Morgan

Karen Morgan, agriculture, food and drink counsellor, Department for International Trade, at the British embassy in Beijing offers her advice:

  • Don’t necessarily think of it as one market. It’s a vast country with hugely different consumer preferences and demand in each area.
  • Equally, don’t be daunted by the scale of the Chinese market – it’s possible to come in and trade successfully in one location initially while you find your feet.
  • Do seek out help. Although there is a lot to think about when you enter China, many companies, ranging from SMEs through to large supermarkets, have done it successfully and many of the challenges you might encounter will likely have been faced, and probably overcome, by someone else already. The earlier we find out about challenges people are facing, the more we would be able to help.
  • First and foremost, check the demand for your product and the market access situation. There is no point, for example, trying to sell beef yet.
  • Etiquette is important, although I do find the Chinese can be sympathetic when we get things wrong. But do take very seriously the importance of guanxi – relationship building is of course important in any business, but it’s absolutely vital in China. In meetings, lunches and dinners, relationship is first, and business is second.

Exporting to China: The essentials

The following advice comes mainly from the China-Britain Business Council (CBBC). See the resources panel for more information about CBBC and what support it can offer.  

Routes to market

Small and medium-sized enterprises (SMEs) are likely to need a Chinese partner on the ground that can help overcome regulatory barriers, cultural differences and the sheer size and complexity of the market.

Using a distributor or agent based in China is a common way of doing this. Distributors generally purchase goods at a discount and sell it for a profit, whereas an agent is normally responsible for selling, promoting, winning orders, solving problems and debt collecting.

Using either of these offers advantages, including a reduction in time and costs to enter the market plus access to local knowledge and a network. Distributors can also provide insight into trends and allow companies to test the market

However, finding suitable partners can be difficult and add to costs. Companies might also risk losing control of their brand image and are at higher risk of having their product copied.

An alternative is to set up a small office in China by becoming a full legal entity in the country. Pig processor Cranswick, for example, employs one person in Shanghai and also Hong Kong.

This gives the greatest level of control, but is perhaps more suited to companies that have already entered the market.

Selling directly to a retailer is a further option, but depends on the category and the retailer, as not all have import licences.

An alternative is to go through a UK-based exporter, but they may lack the on-the-ground knowledge of the Chinese market and need local distributors or agents anyway, adding to cost.

E-commerce is a rapidly developing way for Chinese consumers to buy imported food and drink and this route can be a very effective way to test the market and ship directly to end customers.

Big players include Alibaba and JD.com, but there are many others. UK food companies and retailers such as Sainsbury’s and Waitrose are using such platforms to enter the Chinese market. 

Advice for SMEs

Most farmers and food producers are likely to be SMEs, which means they have the challenge of doing a lot of work themselves. Here are some key tips:

  • Identify your unique selling point for your product. China has a very competitive market that makes it difficult to compete on price. Really get to know the market and tailor what you offer accordingly.
  • Register your trademark before someone else does, as this is a common threat in China. The country uses a “first-to-file” principle, which means someone else could register your trademark.
  • Make your marketing China friendly, such as preparing marketing materials in Mandarin and with photos.
  • Have a clear business plan and expect to present this during meetings. A Chinese partner will want to know your offering makes commercial sense.
  • Have patience and invest time and money in building relationships with partners and customers. It is rare to win business on a first trip to China.
  • Entering China requires a strategic commitment – it will take time and effort, so your whole team needs to be behind it.

A useful checklist – “Are you China-ready?”- with further resources from the EU SME Centre can be found in the CBBC handbook.

Business trip etiquette

Building relationships is very important to doing business in China, so it pays to know the correct etiquette. Some examples include:

  • Business cards are important, so take a good stack. Always give and receive cards with both hands. Take time to read the card carefully before putting it in your pocket. This shows respect.
  • Avoid using British humour or sarcasm, as it probably won’t be taken in the way you intend.
  • Give your hosts “face” at all times – this is one of the most important aspects of Chinese culture. Do not cause your partner or customer to lose face, such as by correcting them in front of peers.
  • Shaking hands is not always needed and avoid physical contact like back patting.
  • Avoid taboo subjects, such as Hong Kong sovereignty,
  • Chinese food is shared and expect your host to offer you excessive amounts of food.
Hands holding business cards

Business cards are crucial © PhotoAlto/ REX/Shutterstock

Be aware of risks

There are a myriad of risks to conducting business in China that companies should be aware of.

This can include Chinese companies misrepresenting their business size and credentials, including their financial status. Non-payment for imported goods is a major risk when dealing with new partners.

Common risks also include partners overpromising, whether that be on what they can buy or what they can do with your goods. Sometimes the service promised is actually false and will not be provided once payment or goods are received.

Theft of intellectual property is also a risk, with companies registering someone else’s company or product names once they have access to their details.

To avoid such pitfalls and identify business risk early, carry out due diligence checks to gather information about a potential partner before entering into any deals with them.

Legal, financial and reputational due diligence checks are generally considered fundamental.

For further information about any of these aspects of doing business in China, including how to identify possible partners and run due diligence checks, see the CBBC handbook. 

Where to find out more and get support

The China-Britain Business Council (CBBC)

The CBBC has a network of specialised staff in 11 UK offices and 15 locations in China working to facilitate trade and business between the two countries. The organisation provides a range of support and advice services, including matching businesses, helping with contacts and language.

UK government

The Department for International Trade has skilled professionals working in consulates in major Chinese cities, plus the embassy in Beijing. Companies/individuals looking to contact them can be referred by CBBC.  

The AHDB

The AHDB’s exports teams work closely with the CBBC and DIT and regularly travel to China to develop relationships and explore opportunities. The team’s work has been key in opening up access for products such as pork. They also organise trips for interested producers. Farmers wishing to find out more can contact senior export manager Jonathan Eckley at jonathan.eckley@ahdb.org.uk

EU SME Centre

Offers market insight and lots of key advice. Works closely with the CBBC. 

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