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Market Overview
China acceded to the WTO four years ago. There is no doubt that China’s transition from central planning to market-based regulatory principles offers significant improvements in market access for many American exporters. However, from an American supplier’s perspective, the transition process is incremental at best and not without bumps in the road.
International Partner Network
U.S. Commerce Acting Under Secretary for International Trade Tim Hauser and China Council for the Promotion of International Trade (CCPIT) Chairman Wan Jifei today signed a Memorandum of Understanding (MOU) to launch a new U.S.-China International Partner Network in 14 major business centers across China. The MOU was signed during the U.S.-China Joint Commission on Commerce and Trade annual meeting July 11, 2005.
“The U.S.-China International Partner Network will foster new relationships between U.S. and Chinese small and medium-size companies in 14 key Chinese business centers, generating new opportunities for U.S. SMEs in the China market and prosperity for both our great nations,” said Hauser.
The wide-ranging cooperation established under the MOU immediately provides:
Sharing and jointly preparing targeted Chinese market research and trade lead information;
Establishing high quality business matchmaking services for American exporters in 14 major business centers across China;
Cooperating on mutually beneficial trade exhibitions and trade missions in the 14 Chinese business centers;
Using the latest software and technology to disseminate market opportunity information to American and Chinese business representatives to facilitate U.S.-China trade; and,
Training CCPIT trade specialists on high quality client service standards and techniques.
The new U.S.-China International Partner Network agreement establishes service centers in Dalian, Chongqing, Hangzhou, Harbin, Kunming, Nanjing/Jiangsu Province, Ningbo, Qingdao, Shenzhen, Tianjin, Wuhan, Xiamen, Xi’an/Shaanxi Province and Zhuhai.
Doing Business in China
American companies continue to have mixed experiences in China. Some have been extremely profitable, while others have struggled. To be a success in China, American companies must thoroughly investigate the market, pre-qualify potential business partners, take steps to assure that they will be paid and craft contracts which minimize misunderstandings between the parties. The problems of doing business in China can be grouped in four large categories:
• China often lacks predictability in its business environment. Its current legal and regulatory system can be opaque, inconsistent, and often arbitrary. Implementation of the law is inconsistent. Lack of effective Chinese government protection of intellectual property rights is a particularly worrisome issue for many American companies.
• China has made significant progress toward a market-oriented economy, but parts of its bureaucracy still tend to protect local firms, especially state-owned firms, from imports, while encouraging exports. WTO accession is certainly helping in this area as well – but progress is being made only gradually.
• Foreign businesses tend to under-estimate the challenges of establishing operations in China. Encouraged by a government eager for foreign capital and technology, and entranced by the prospect of 1.3 billion consumers, thousands of foreign firms have charged into the Chinese market. These companies often do not fully investigate the market situation, don't perform the necessary risk assessment, and fail to get legal counsel. Without the necessary preparation, these companies often stumble into bad business deals, resulting in trade complaints and lost investments.
It is important to understand that while reform is absolutely essential for China to fully participate in the world trading community, in many areas, the necessary changes have not yet taken place. Companies must deal with the current environment in a realistic manner. Risk must be clearly evaluated. If a company determines that the risk is too great, it should seek other markets.
Best Prospects
The growth of imports from the United States in many key sectors, such as energy, chemicals, machinery, telecommunications, medical equipment, construction, services and franchising suggests that China will remain an interesting and viable market for some time to come.
To learn more about these sectors opportunities and other best prospects in China, please visit our CS China website to find the China Country Commercial Guide.
Market Entry Strategy
Feel free to use our Gold Key Service to learn, first-hand about the Chinese market in your industry:
- A company should visit China in order to gain a better perspective and understanding of its potential market and location. Especially given China’s rapidly changing market and large area, a visit to China can provide a company great insight into the country, the business climate, and its people. Chinese companies respect “face-to-face” meetings, which can demonstrate a U.S. company’s commitment to working in China. Prospective exporters should note that China has many different regions and that each province has unique economic and social characteristics. One should be careful not to generalize about such a large country.
- Relationships are key to finding a good partner in China. To maximize its contacts, companies should aim at forming a network of relationships with people at various levels across a broad range of organizations.
- Agents are commonly used in China by U.S. companies to initially create these relationships. Localized agents possess the knowledge and contacts to better promote U.S. products and break down institutional, language, and cultural barriers. The U.S. Commercial Service Beijing offers a wide array of services to assist U.S. companies with U.S. exports in finding Chinese partners. U.S. companies are strongly encouraged to carefully choose potential Chinese partners and take the time to understand their distributors, customers, suppliers, and advisors.
Upcoming Trade Shows
The U.S. Commercial Service in China has an active trade events program throughout China. Please visit our trade events schedule at the following website for more information on upcoming events.
Contact Our Trade Specialists
Please find our CS China colleagues from the U.S. Commercial Service in China in the following offices:
- U.S. Embassy Beijing
- U.S. Consulate Chengdu
- U.S. Consulate Guangzhou
- U.S. Consulate Shanghai
- U.S. Consulate Shenyang
at the following website:
http://www.buyusa.gov/china/en/industry.html
or visit the China Business Information Center: