Successfully exporting to China. Overcoming cultural differences.
If you want to export products to China, thorough preparation is key. A lack of preparation may cause you to be tripped up by cultural differences or regulatory barriers. Find out why China is becoming the number one export destination for Swiss SMEs, and how to protect yourself against counterfeits.
Swiss SMEs are exporting more and more to China
China is becoming increasingly important to Switzerland's foreign trade. In 2019 goods with a value of 21 million Swiss francs were exported to China. That puts China at number 4 on the list of Switzerland's most important sales markets, behind Germany, the US, and the United Kingdom. Only ten years ago, China was ranked 8th in the federal government's foreign trade statistics. Back then, Swiss companies were exporting a quarter of the volume compared to 2019.
Urs Buchmann, who works for Credit Suisse in China, even sees the Chinese market as by far the most important for Swiss SMEs: "It is the fastest growing and most dynamic economy in the world. If the current trend continues, it will soon overtake the US as the world's largest economy." On top of that, the People's Republic is gradually opening itself further to the global community.
China is a tough nut for exporters to crack
In-depth market analysis is a must for anyone hoping to tap into the country's huge potential. China has long lost its status as an insider tip: Domestic and foreign competition should not be taken lightly. The potential client base should also be examined in detail. Just like the US, China is a large country. It's a good idea to start by focusing on individual provinces and building a regional base before expanding nationally.
In China, Swiss SMEs can expect to face not only strong competition but also a number of cultural barriers to trading. "Intercultural dialogue often fails because of significant language barriers on both sides," says Urs Buchmann, describing the key difficulty. A lack of understanding of the local market and cultural norms can also lead to disaster.
The "Swiss Made" label is a selling point when exporting to China
Swiss SMEs that want to start exporting their products to China cannot avoid the task of getting to grips with the regulatory and legal environment. They must struggle through the range of regulations that apply to healthcare products, medical devices, foodstuffs, and so on. Obtaining official authorization is often costly, and in the case of certain products this can even be impossible for foreign companies. Therefore, Swiss SMEs should look into the legal requirements that apply to their product in great detail and well ahead of time.
The potential advantages of entering the Chinese market should always be calculated on the basis of a realistic business case. Costs and benefits must be weighed up carefully against one another. In particular, SMEs should ask themselves at an early stage whether their product range, company structure, and management meet the specific requirements of the Chinese market. Urs Buchmann believes that Swiss SMEs have an edge over their international competitors because of where they come from: "The 'Swiss Made' label is very highly regarded in Asia, and Switzerland has become a leading country brand over recent years, particularly in China."
A Chinese subsidiary can be the right solution for Swiss SMEs
Swiss companies may have a greater chance of success in China if they not only export their products to the country, but also establish a presence there. According to Buchmann, "A credible presence in China is a vital prerequisite for the medium-term success of mid-sized companies." Outsourcing part of the production process may therefore seem like an attractive solution for Swiss SMEs. The "Made in Switzerland" label may still be used, provided that no more than 40% of the product is manufactured in China.
The problem of counterfeiting remains an issue for companies exporting to China. The opportunities for Swiss SMEs to protect themselves from this predicament are limited, and include registering patents and brand names and concluding watertight legal agreements with business partners or clients. Vital precautions include building contacts with knowledgeable partners on the ground, gaining familiarity with local customs, and monitoring manufacturing processes and products. According to Buchmann, however, innovation is the best protection: "Swiss companies often produce highly complex niche products, and so the likelihood that they will encounter the problem of counterfeiting is lower than for manufacturers of mass products."