China is considered the fastest growing market in the world and it has the largest population in the world – 1.36 billion people – making it one of the best places to do business.
Doing business in China is not without its challenges – the language and the fact that it is a communist country being two factors – but it can lead to opportunities for investment and business growth that other places can’t compete with.
So here are 7 reasons why you should consider doing business with China.
1. Largest Car Market in the World
Cars are big money. They cost a lot of money to make but they can also make a lot of money as well. One solution can be to have them manufactured abroad and shipped back to the U.S or Europe.
But the problem can be the import duties or tariffs. China’s growing middle class means there is a market for the cars to be made and then sold in China, avoiding this problem.
Cars are also somewhat impervious to the disruption of the digital economy as consumers will still need cars, they will simply be driverless ones. This technology is not mainstream yet meaning there is no obvious threat to the market.
2. Online Retail is Bigger Than America
Chinese people love to shop online. With the Chinese Government imposing a firewall of censorship on the internet, WeChat, not Amazon, is King.
Hermes now delivers and many companies also deliver through WeChat. This includes luxury items. WeChat Pay is also the dominant way consumers pay for things and for communication between clients.
WeChat has banned consumers from trading cryptocurrency and using it to pay for purchases. But many feel this will only increase its rollout in the country.
3. A Big Middle Class
China’s middle class is booming. And this is more important than other factors in driving the growth in Chinese businesses because it means that the amount of people with disposable income is growing.
This means more people have more money to spend on luxury goods and on things that would otherwise only be targeted at the elite of society.
One of the main goods which this is affecting is cars. Rather than buying second hand, the Chinese middle class are happy to buy brand new cars which show off their new found status.
Using a service like Simplify can be useful for marketing and scaling your business to this new middle class in China.
4. ChAFTA is Coming
An agreement between Australia and China means that there will soon be free trade in a lot of areas between the two nations. Whilst America has imposed tariffs and engages in a trade war, other countries are stepping in to take a piece of the economic pie.
This is good for people who want to take advantage of the conditions for business in China but who also want to sell on to Australia, tariff-free.
5. Strong Currency
The 2008 Economic Crisis hit the West hard. In particular, it meant many Western countries introducing a policy of quantitative easing to make it easier for people to lend money and to keep the system afloat. But pumping more money into the system can also mean the currency loses value.
Political decisions like Brexit the U.K, the election of President Trump in the U.S and the rise of the far right in Europe have also seen a lot of unpredictability in terms of currency in the West. This has affected the dollar, the pound and the Euro.
China has been largely ring-fenced from this and the Yuan continues to increase. This shows investors are confident that the currency will continue to grow as more people look to do business in China.
6. Lower Interest Rates in the West
It’s not that interest rates are high in China it’s that they are low in America and Europe. This is to protect against inflation due to the financial crash of 2008.
This is good for most average people on the street as it means the price of their weekly shop will not increase. However, it is bad if you are a business trying to save money to invest in bigger projects.
The low-interest rates mean you are better off investing your smaller money in projects, property or in another country like China where interest is high enough for you to make a substantial return each year.
7. Other Markets Are Stalling
India and Bangladesh have often been seen as two emerging markets in Asia from which to do business but their growth has stalled. Although there are countries in Africa that are seeing growth, their growth rate is slow to pick up compared to other markets and this should be seen as a long term investment.
China, on the other hand, continues to grow at a high rate. And this looks set to continue. Currencies in these countries also fluctuate meaning it can be hard to make medium-term decisions because the value of money can change from day-to-day, week-to-week.
Business in China is the Future
China is the future of business. As the largest economy, it is the place to expand your business globally. With a growing middle class, there are lots of consumers who are willing to pay for cars and expensive services that would usually only be marketed in the middle class.
A strong currency means investing in China is not as risky as it is in some countries where the currency moves up and down a lot. In fact, investors often argue that it is better than keeping money in a U.S or European bank.
Although doing business in China comes with a lot of challenges, there are a lot of advantages that more than making it worth it.
If you are interested in reading more about Asia, be sure to check out our guide to the best places to travel in Asia.