Doing Business with Chinese B2B Manufacturing Companies

Chinese Manufacturing Companies
29th May, 2017

China is one of the key players in the global economy and the steadily rising importance that it commands is not a secret. Businesses all over the world are nowadays looking forward to doing business with Chinese B2B manufacturing companies. This Asian giant has an enormous population of more that 1.3 billion which is equivalent to 20 percent of the world’s population. The Chinese economy ranks fourth globally and it has clocked an approximate growth rate of 10 percent over the past 20 years, making it a major economic power to reckon with. The growing importance of China has a significant impact on all industrial sectors - especially the manufacturing sector - and this has roused the interest of market research companies in this nation. Even a decade ago, the Asian market was completely ignored as market researchers did not found it lucrative. However, at present, China is compulsorily included among countries where opportunities need to be frequently assessed.
On identifying the potential of China as a growing market, large numbers of small and medium-sized enterprises (SMEs) have started to establish their presence there. Many larger multinational corporations (MNCs), that have not been able to achieve any significant result in China so far, have also started to revamp their operations and distribution networks in a way that would augment their position in this geography. Hence, it is needless to say that, market research companies are facing a serious as well as substantial requirement for relevant information pertaining to the Chinese B2B manufacturing companies. Owing to the fact that this requirement has been growing continually, the demand for reliable online B2B directories like ECpages has become very high.
Characteristically, the Chinese market has steep entry barriers, and for companies from the Western nations, these are really tough to overcome because of differences in language, culture, socio-economic and political aspects, trade policies and regulations, and legal systems. However, China has been able to successfully strengthen its economy to such an extent that by the year 2020 it would surely replace the U.S. and become the number two economy in the world. This has rung a bell for most the companies operating in the B2B domain.
China is no longer a low-wage economy that produces commodity products. Upon realizing the fact that remaining a low-wage economy doesn’t promise viability, Chinese companies have constantly been trying to restructure as well as scale up their production system and the same attempts also reflect in the way China is exporting nowadays. With the government showing interest and investing strategically in it, China can boast of a highly practical manufacturing technology. Such technological advantage coupled with a strong wave of globalization has led Chinese B2B manufacturing companies to become more productive and less labor-intensive. This has opened avenues for global suppliers in the B2B manufacturing sector to enter the Chinese market in order to help it meet huge demands for manufacturing equipment, and, of course, automation systems for factories as well as processes.
China’s market is growing at an exponential rate, and it has been observed that it has become the common hunting ground for both foreign - comprised mostly of American and European companies - and Chinese B2B manufacturing companies. However, the most interesting piece of data says that except only those customers who are exceptionally price-sensitive, the majority of Chinese B2B manufacturing companies have been showing preference for foreign suppliers. Another major finding from the automation industry is that many of the local suppliers, who had started as channel partners and represented foreign companies, have now acquired necessary technical skills along with relevant industry knowledge to grow even up to the level of fully equipped manufacturers. All these data definitely help deduce that the intense competition in the Chinese manufacturing sector is aimed at scraping off the market share of foreign suppliers.
Under such circumstances, foreign company needs to devise deliberate strategies that would focus on the prime opportunities so that they can continue to do business with Chinese B2B manufacturing companies. While strategizing, foreign companies would have to first focus on:
1. Growing end-markets: While the main target-customers would be Chinese B2B manufacturing companies, intense competition from local players might create a barrier. In that kind of a situation, it would be better to shift focus on healthy and growing markets rather than channelizing resources to build relationships with depressed sector such as oil and gas, mining, etc., or non-sustainable low-end manufacturing companies.
2. Demanding end-markets: As mentioned earlier, quality-conscious Chinese B2B manufacturing companies have an affinity towards foreign suppliers. Capitalizing this and understanding the fact that customers that themselves aim to command top positions in the most lucrative global markets are the premium targets would again help lay roadmaps to forge longstanding and profitable relationships with growth-oriented Chinese B2B manufacturing companies. However, tough competition is a constant feature in these markets and hence it is deemed necessary for foreign companies to keep a track of all changes - major as well as minor - that would take place in the Chinese market and be prepared for contingencies.
After the target market has been identified and strategic focus has been laid on the prospective Chinese B2B manufacturing companies, a foreign supplier has to benchmark its value against that of its local competitors. As most of the Chinese companies in this sector have acquired their knowledge and skills much later than their foreign counterparts, it is most likely that they have lesser experience as well as track record. Any Chinese B2B manufacturing company that has been aiming on entering the global market would naturally avoid the risk of procuring from such suppliers, thereby giving foreign suppliers a competitive edge. However, the Chinese prefer simplistic solutions that do not need much management. Hence, it would make absolute sense if foreign suppliers, especially from the U.S., are flexible as well as realistic while doing business with Chinese B2B manufacturing companies.
Finally, it is very important to work with right partners. Although this has relevance in every walk of life and every type of business across the world, this is quite a stringent requirement in China. Business in China is based heavily on relationships and there is a strong personal element in business transactions. This is in contrary to the Western business environment. Thus, a foreign supplier needs to have business partners who have sufficiently strong networks and significant levels of influence in the local market. Obviously, finding the right partner is not an easy job. However, ECpages could definitely be useful as an online B2B directory and help businesses go through its extensive database to learn about companies in China and take informed decisions while selecting a business partner.

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