Incredible trip

The Study Trip to China was one of the best experiences of my life. I have never stayed in a country and with a culture so different.

I had a different vision about the Chinese people and especially about their foreign investment policies.  My idea about this has changed for different reasons (with 2015 data):

In fact, foreign investment is one of the keys to economic growth in the country for the last 30 years. This proves that china´s economy is continuously growing.

This is even more important when the amount of foreign direct investment in the world decreases.

The restrictions that may appear to foreign investment can be really different and can appear at different times:

In addition, there are sectors that are very regulated by the government and where it is not possible to accede like:

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Foreign investment policies in China

According to the 2016 World Investment Report published by UNCTAD, China has lost its position as the world’s largest FDI (Foreign Direct Investor) recipient to the United States and Hong Kong, and now ranks third. The country’s economy also ranked the second most attractive to multinational companies in 2016-2018, after the United States. The absorption of FDI is part of the policy of opening China to the outside world. In 2016, FDI followed their upward trend and reached USD 139 billion, a new record level. FDI flows from China abroad, valued at USD 161 billion in 2016, outpaced FDI flows into the country. China has a large and rapidly expanding market, which was not overly affected by the financial crisis. With a strong potential, a wealth of employees and potential partners eager to learn and evolve, the country is a base for low cost production. Nevertheless, certain factors can hinder investments, such as China’s lack of transparency, legal uncertainty, low level of protection of intellectual property rights, corruption or protectionist measures which favour local businesses.

Why You Should Choose to Invest in China

*Strong Points
China’s strong points include:- China is the biggest internal market in the world with 1.3 billion potential customers.
– It is a rapidly growing market (usually at least 7% growth per year).
– Even though the situation is changing in certain areas, labour costs remain comparatively low.
– With the development of the Western provinces (particularly, the Sichuan province), China offers new opportunities.
*Weak Points
China’s weak points include:- An ever-changing legal context.
– Bureaucratic and administrative complexities.
– Reports of a lack of transparency, corruption and weak intellectual property rights protection.
– Cultural differences in business practice may be difficult for foreigners to learn and apply in new business situations.
– An underdeveloped middle management level and high staff turnover rate, which may cripple market acquisition.
*Government Measures to Motivate or Restrict FDI
The Government of China has stated that it will encourage investment in the following industries or sectors: high technology, production of equipment or new materials, the service sector, recycling, clean production, the use of renewable energies and environmental protection. On the other hand, the Government’s foreign investment guide has stated that investments in sectors or Chinese companies that already have a relatively strong production capacity and use advanced technologies ‘will not be encouraged’ (State Commission for Development and Reform, November 2007). In addition, the country appears to discourage foreign investment in sectors deemed key to social stability, sectors for which China seeks to develop domestic firms into globally competitive multinational corporations and sectors that have historically benefited from State-sanctioned monopolies or a legacy of State investment. The Government also discourages investments intended to profit from speculation (currency, real estate, or asset). Moreover, the Government has indicated that it plans to restrict foreign investment in resource-intensive and highly-polluting industries.

Investment Aid

Forms of Aid
Foreign investors enjoy corporate tax reductions, exemptions of tax on dividends repatriated during a certain period and other tax advantages. Moreover, foreign direct investment incentives include packages of reduced income taxes, resource and land use fees, and import/export duties, as well as priority treatment in obtaining basic infrastructure services, streamlined Government approvals, and funding support for start-ups. The Ministry for Foreign Trade and Economic Cooperation (MOFTEC) can be contacted for any information concerning opportunities in China.
Privileged Domains
China encourages foreign investment primarily in high technology, clean energy and export-oriented sectors.
Free Zones
The Government has created various zones, granting each tax exemptions or tax incentives to attract overseas investments. They are primarily the 5 special economic zones and the 14 coastal cities.
The special zones are Shenzhen (at the border of Hong-Kong), Zhuhaï (close to Macau), Shantou, Xiamen (vis-à-vis Taiwan) and the island of Hainan. They were selected because they were completely under-developed.The 14 coastal cities are Dalian (in the province of Liaonong), Shanghai, Ningbo, Wenzhou (in the province of Zhejiang), Fuzhou (in the province of Fujian), Guangzhou, Zhanjiang (in the province of Guangdong), Beihai (in the autonomous region of Guangxi Zhuang), Tianjin, Yantai, Qingdao (in the province of Shandong) and Lianyungang, Nantong (in the province of Jiangsu). For the past few years, other cities have also been regarded as coastal towns profiting from the same status. Unlike the 5 special zones, these cities were not underdeveloped, but key industrial centres in China. Overseas investment has facilitated improvements to the infrastructure and the creation of new, more advanced ones.

The Key Sectors of the National Economy
Agriculture, breeding, forestry and fishing, extraction, manufacture and services.
High Potential Sectors
Chemical industry, insurance and bank, high technology, renewable energy, environment.
Privatization Programmes
– Telecommunications
– Energy
– Environment
– high-technology
– Services

Marketing: Communicating a new product in China is different.

Before talking about marketing, I must poont out that in China there is a totally different culture, meaning that the channels and ways of communicating a new product are different than the ones used in the Occidental world.

For instance, Wechat is an app that can be a good instrument to communicate a service or product you are offering. Especially taking into account the number of “Wechat” users is currently up in the millions. But there’s a myth, “China represents a 1.4 billion customer base”. Of  course there are a lot of people in China but that doesn’t imply you are going to sell your product to them. Anyone triying to sell there should define the segment they are targeting. For example:

Which are the provinces with the higher GDP per capita located at the east of China  (Tianjin, Shanghai, Beijing, or Jiangsu)?  Here we can expect that more people spend their income in higher proportions.

Another element that certainly has an influence on marketing is the government’s protectionist policy. The barriers that a foreign brand may experience is very high. Several Chinese brands that are in the top 10 of most valuable Chinese brands for 2014 have a certain level of protection by the government.

These are some of the things every foreign brand, who wants their products get known, so marketers at first should have to understand the target market very well to guarantee that the Chinese consumers have a correct and favorable perception of the product which is trying to sell in China. But, how much it takes to achieve this with an assertive marketing strategy? Does it mean that a foreign brand should alters some brand attributes to demonstrate alignment with local Chinese culture and local Chinese tastes? the answer for these questions depends in how much is the brand willing to change, strong global brands didn’t change their principal attributes but yes they support that a little adjusts are necessaries to compete in Chinese market. And how Leow of NeochaEdge said “Not everyone has to change their brand, but they have to show that they ‘get’ the local culture” or like another strong global brand said in the hands of Pestridge of Nike “It’s like any relationship; you have to show an authenticity. If we just brought Kobe Bryant here and did nothing with him that wouldn’t work”.

Paulo César Benavente P.

Resultado de imagen de comercials in china   Imagen relacionada


Trip to China. Visit to Bright Dairy

Our journey to China has given us the opportunity to see and learn completely different things from those we are used to. This has been possible to the multiple visits we made there: not only the educational ones but also the cultural ones. In this post I want to highlight and briefly describe what we learnt during our visit to the company “Bright Dairy & Food” that belongs to the largest group known as “bright food (group) co. ltd”.
Bright Food Group is a multinational company located in Shanghai (China) whose main activity is manufacturing food and drinks. It is the second company of this type in China considering their revenues. The company is completely owned by the Chinese state. Bright food has developed its commercial activity in the region of Asia and the Pacific for more than 100 years (that is the case of some of the brands of this business group). During that time the Group has cooperated with several international brands. Its partners include companies like Nestle Shanghai Ltd, Associated British Foods plc, Coca-Cola (China) Beverages Ltd, Pepsi (Shanghai) Ltd, Danone Asia Pty Ltd, Zwilling J.A. Henkels International Ltd and Gillette Duracell China, and else.
As I have said, we visited Bright Dairy & Food which is one of the most important brands of the Bright Group. Bright Dairy is one of China’s largest dairy producers. It has more than 10 pastures with 12,000 cows and a 500,000-ton annual production capacity. Bright Dairy churns out a variety of dairy products including disinfected milk, fresh milk, yogurt, pasteurized milk, cheese, milk powder, and even fruit juice. Its products are packaged in Tetra Pak containers.
Therefore, in short, this trip has given us the opportunity to meet one of the largest companies in the world and we have also had the opportunity to know some of the characteristics of the food industry of the most populous country in the world.

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Bright Food

Bright Food is a multinational food and beverage company on Shanghai which operates in different markets such as Asia and the Pacific, whose brands grow as they adapt to new trends in consumer tastes and innovation.

Their aim is to get best products that meet the needs of the consumer. For this reason, they guarantee the best quality standards by actively controlling each stage of the process and supply chain.

It is one of the largest food groups in China that cooperates with several international brands and owns four publicly traded subsidiaries. Among the competitive advantages it has to distinguish itself from the competition: lasting relationships with customers and suppliers, the ability to obtain better food products to meet consumer needs and the ability to beat the competition in terms of customer service.

Bright Food Group is a large-scale industrial group on Shanghai. The group specializes in modern agriculture, food processing, production and distribution. It focuses on being the best supplier of raw materials and food producer with basic research and development capabilities in the food industry of China. It has become the largest integrated food group that serves both domestic and international markets and is listed in leading companies in China.

Among its partners are companies such as Nestlé, Coca-Cola or Danone. It has a wide range of products including cheeses, pastries, oils, vinegars, meats and fish, chocolates, biscuits… During the visit to Shanghai we were able to see a factory specialized in the production of yogurts and dairy products.

During the visit to the dairy production factory we were told that in China, milk had once been a low-consumption product. China began to buy imported milk because of the great demand and distrust of the national. In Shanghai, imported dairy products could be classified as a luxury product, products that occupy large sections in specialized supermarkets and which have great acceptance among the Chinese public and the large number of expatriates living in Shanghai.


Innovation in China

China has the largest population in the world, and beside EEUU, is one of the strongest countries nowadays where the innovation, the topic I will speak about, is the key of the economy and the way of the growth of this enormous country.
When I arrived to Shanghai, I was really surprised about the differences of culture and lifestyle, but also about the huge change the country has suffered in the lasts years. 20 years ago, China was out of the world in terms of economy and politics, but yearly this country has done a big effort to locate between the strongest potential forces in the world. As I said, the innovation, the way of doing things during these years has been one of the main reasons why China nowadays has one of the strongest markets in terms of competition. Apart from these, the fact that china work as a unit in comparison to Europe for instance, really help them to develop a strong economy.
As we saw during the session, really good session from my point of view, much better speeches than some I have taken in Spain what I really appreciate (thanks to the Shanghai Jiao Tong University), is that from a long time ago, China has been established a 5 year plan. In this plan, which is the 13th 5 years plan, year by year, the main points that China is concerned to grow as a strong country are established. Currently the innovation is one of those points apart from others such as greening, balancing, opening up and sharing. But sincerely, innovation nowadays, from my point of view at least, is the most important and the one china must focus on to develop and continue growing itself.
I felt a little bit “scared” when I realised that thanks to innovation, China has passed from been a really cheap manufacturing country, where the economy were focused on low prices to nowadays been a country where the quality is taking part in a really really strong way. What China is offering in the market is low cost product for an amazing price, but of course these products are medium-high quality. This has to be a deep threat worldwide, cause they are entering in a market where they can be one of the strongest one. One clear example is the Xiaomi brand, offering a good quality product for a really reasonable price, copying the Apple style.
In the past, the economy of this country were focused mainly in low manufacturing labour force, offering in the market low cost product, where the copying mind was the one, but nowadays, the innovation is changing the way of doing things, and this change is a quite positive change for them which is making China one of the strongest countries in the world.


How to success doing Marketing in China.

According to the Lecture “Marketing in China” taught by Gabor Holch in the EOI Business School Seminar in Shanghai “How to do business in China” (March 2017), there are many factors that must been taken into account when doing marketing in China: politics, economics, socio-demographics and culture.

Since I’m not an expert in the Chinese Market, I would like to give a brief overview about things that attracted my attention and must be taken into consideration from a Marketing point of view.

The first thing that surprised me once I set my foot on the street was the number of malls I saw in just one street: their size, their huge advertisement and the large number of shoppers. By this I mean the high level of consumerism.
That was something I did not expect. Were we actually in China or just in Chinatown of any western country?

It is already happening: China is apparently opening up. Or at least it is changing.

Since the released of the Fifth Plan (1976–1980) China has evolved both political and economically speaking. Its economy has grown at an average of 9.8 percent since 1978, making it the fourth largest economy in the world. Incredibly, China has pulled off the equivalent of reform, renaissance and industrial revolution in 30 years.

But as the old saying goes,

‘All that glitters is not gold’

We live in the customer-centered Era. Companies that succeed are those who target their consumers and adapt their products to the needs and tastes of customers. As a result, companies must adapt to the Chinese consumer if their want to succeed. ­­­

According to Angela Lee, a professor of marketing at the Kellogg School and an expert on cross-cultural issues in consumer behavior:

“Those companies that have a genuine understanding of Chinese consumer culture are better placed to succeed.”

There are psychological differences between East Asian and Western societies that must be taken into account when doing marketing in China. Those companies who understand the nuances of Chinese consumer psychology have a better chance of long-term success.

These are some interesting factors to be aware of:

Though it is a dynamic market and evolves constantly, Chinese tradition still leads the way: “there are elements of consumer behavior that are rooted in the psychology of a culture, and recognizing that can make a big difference.

 

 

Sources:

“Marketing to the New Chinese Consumer” (2001). WFA World Federation of Advertisers and Forbes Insight Report.

“Marketing and Selling to Chinese Businesses”, Matthew Harrison and Mark Hedley. B2B International

“What Chinese Consumers Want”, KelloggInsight (Sep 8, 2015). Based on insights from Angela Y. Lee. Kellogg School of Management at Northwestern University.

“Looking back over China’s last 30 years” (December 19, 2008). By CNN’s Beijing Bureau Chief Jaime FlorCruz.

 


Complaints about labour law in China have been increasing

strikes

Over the past 20 years, China’s GDP has considerably been going up (10 355 billion dollars in 2014, 18 412 billion dollars for European Union for example) and today, China is the second largest economic power in the world. Thanks to the economic growth, work conditions, especially in factories, have been improving. However, they remain very low and many Chinese workers still have poor work conditions. That is why, some of them have started to complain about that.

China has the largest workforce in the world and about 50% of total manufactured products come from China. A lot of workers, despite the economic growth, still suffer from overexploitation. Many of them work 60 hours per week and are very poor. Their wages are low and their managers do not treat them well. But most of them are afraid of resigning because it was the only job that they found. It is not easy to find a job for Chinese workers, particularly for them who come from countryside and who do not have any diploma, so they accept any job offer in spite of poor work conditions. For instance, employees at Foxconn, the company that manufactures iPhones for Apple and other technological devices, work very hard under deplorable conditions. In this company, the suicide rate is very high and it incredibly is under the average in China.

Therefore, some work independent centres have been emerging over the 10 past years in the country, as an alternative to trade unions controlled by the government. Also, in 2015, 2775 manifestations were registered. It shows that Chinese workers are more and more willing to protest against the government in order to defend their labour law. Globalization helps them to be conscious about that, showing the work conditions and lifestyles in developed western countries. Nevertheless, the power of Chinese government still is very strong and repression is fierce and violent. If somebody demonstrates against his company or the government, he will risk going to jail or having severe punishment. Thus, it limits initiatives of workers to complain.

In conclusion, labour law in China and work conditions still are much lower than in Europe or in the USA, and a lot of workers have found out this. In consequences, some revolts have started, the number of strikes has been increasing and some movements have been created to defend labour rights. But, repression led by the government is tough and it restricts the magnitude of the movement which is not important enough to really impact the current situation. Is this situation sustainable? How long will it remain like this? We can assume that things will change in the near future and that work conditions in China will improve but we do not exactly know when.

Vincent Tessé


Marketing in China

chinese-market-street

After the lecturing with the expert Gaborn Holch, we were able to realize how the marketing in China worked and what influence it had in its market and in the society.

Here are the five key points I consider the most important to understand the chinese marketing.

1. China is Marketing

Everyone who comes to China from other countries has a preconceived idea about China. People who want to do business in China come with some attitude, since they think it is a developing country. Know that it is difficult to establish business relations with Chinese people, but at the same time know GDP data grow annually by 15%.

2. China is different

It’s obvious that the platforms that dominate in China are markedly different to ones that marketers are familiar with elsewhere – even those in their Asian neighbours. However, it’s not just the platforms that are different; the ways that Chinese netizens use social channels is also markedly different, and marketers need to carefully adapt their approaches for China’s cultural and societal idiosyncrasies as much as for its technological differences. One size does not fit all when it comes to China.

3. Huge enough

China has enough population and power to have its own chat (WeChat), its own brand of mobile (Xiaomi) or its own search engine (Baidn)

4.  Not all ideas works as same in China

China does not want to be better known for its low cost products and manufacturing production, it wants to make differentiating and high quality products.

There are two different product styles. For example in the case of wine, there is on the one hand, the one produced in China, Chinese style, with low cost and on the other hand, imported from Italy, with high quality and high price.


Technological Development in China

Nowadays, technology is everywhere. You need technology to live. Since the internet arrived to our lifes, the world began to grow exponentially in terms of technology development all over the world and now we are almost in the asymptote of this development.

There are a lot of sector where you can develop technologies but it doesn’t mind which one: most of the stuff are provided by China. There are a lot factors to find China attractive for new technologies development: amount of people, cheap raw material, cheap labour cost, growing market, early adopters community etc…

Chinese government, knows all this chinese power, and doesn’t care to put a lot of money in R&D departments or StartUp to keep developing new technologies. This strategy is used to show a better brand image of China abroad, especially to Europe and USA.

That’s the reason why they invest huge amounts of money to accelerator to finance StartUp even asking anything in exchange.

In conclusion, nowadays China is one of the best places (if not the best) to start a company related with technology; you have government support, a lot of testers and very cheap cost.



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