General Characteristics of the Chinese Market
The most visible characteristic of the current state of the People’s
Republic of China (PRC), is the ubiquitous signs of a rapidly transforming
society. Particularly during the period of five years given to China as the
transition starting from the process of entry into the WTO in 200, this
transformation is expected to manifest itself in all sectors. Since this
change will also encompass a certain openness/liberalization, albeit to a
relative extent, it is anticipated that the process will also yield
fruitful results on behalf of the Turkish exporters.
Regional Differences:
At over 9.6 million km², PRC is one of the world’s biggest countries,
and administratively, the country consists of 31 States/independent
municipalities. The physical difference between these regions, primarily the
differences in climate, also creates a diversification amongst the
preferences of the consumers. While the eastern regions, which form the
coastline of the country are rapidly developing, the western regions have
remained rather backwards. For example, while national income per capita in
Shanghai was 4,182 dollars in 2000, it was 322 dollars in Guizhou. In the
year 2001, while the income per capita of the population living in the urban
areas increased by 8.5%, the rate of increase in the income of the
population living in rural areas have remained at 4.2%.
Legislation and Problems in
Implementation:
Although market economy reforms have been initiated in the People’s
Republic of China, the effects of state monopolies and the restrictive
communist process have not yet been completely removed. Efforts to
implement the free market reforms within an étatiste system, have
exacerbated the bureaucratic ramifications and corrupt practices. The
centralist government began to implement harsh measures in its struggle
against corruption. The regulations vary amongst the administrative regions
within the country; moreover, diversities in implementation also exist among
different executive authorities within the same region. The codification of
the laws and regulations are open to conflicting interpretations, and due to
the existing inconsistencies in the interpretation of the executive powers,
different implementations emerge. Within this framework, a broad unofficial
structure has been set up, and this structure is defined as ‘guansi’
economy, which means ‘friendship based economy’
Strategies for Market Entry
1. Contacts with top level Chinese officials should be initiated in order to
attract Chinese investors in the Turkish free zones.
2. The focus must be laid on high quality products rather than products with
low prices
3. The target consumers must be designated as upper-middle and upper
income groups; and the product must be shaped in line with the expectations
of this consumer profile.
4. Disregarding the purpose of the export or the investment, as an
imperative, personnel representing the Turkish investors must be
continuously recruited in the local market, and investors must open a
representative (if not a company) in the Chinese market.
5. Particularly in order to minimize the losses that might arise from
cultural differences, it must be kept in mind that during the determination
of the remuneration to be paid to the key personnel, reckoning of a cost
that is well above the Chinese standards is a requisite; and that otherwise,
the key personnel recruited in regions where foreign investments are
particularly dense, may leave the firm for a marginal difference in the
wage that he has been offered. It should be kept in mind that the turnover
rate for qualified labor which is tolerable at a level of 3% throughout the
world, is above 10% in China.
6. It should be kept in mind that personal relations based on friendship
are extremely important, that the execution of a contract merely consists of
a procedure that occurs during the last 10 minutes; however, that the key
to success in the execution of satisfactory and reliable contracts lies in
the cultivation of intimate relations and friendly dinners.
7. It should be kept in mind that the growing of popularity of a given
product in a market needs time; the concept of “time” in Chinese culture is
directly opposite to “time” as conceived in the Turkish culture; that even
in banks where transactions proceed as an extremely slow pace, the Chinese,
as dictated by their culture, can wait for hours with a great patience and
without showing any reaction at all.
8. Investors must participate in professional specialization fairs
consistently, until the accomplish their objective and the level of
competency of the fairs to be participated, must be carefully investigated.
9. It must be understood that the most effective way of protection against
the unwritten rules and arbitrary practices is to receive consulting
services. Hence, the financial profile must be estimated in due
consideration of the fact that penetration into the Chinese market will
entail labor and cash resources that are above average.
10. Although the significance of becoming a brand name in the achievement
of success in foreign trade is evident, investors in the area of ready to
wear clothing products designed for the upper-middle income groups, must
constantly be in pursuit of “style” that would remind the quality of the
more expensive brand products
11. Opportunities to rent spaces in the “department store” type shopping
centers in the area of ready to wear clothing must be investigated.
12. Although the production and tradition of green tea is an endemic aspect
of Chinese culture, opportunities must be investigated for the inclusion of
cut black instant tea and other fruit flavored teas within Turkey’s
conventional export products; and within this scope, the existing potential
found in the cities along the eastern coast, which is a high priority area
for development, and which is the center of attraction for foreign capital,
must also be evaluated.
13. In addition to Turkey’s conventional export products, marketing
researches must be performed for certain other products that are considered
to have an important sales potential, such as shoe polish, suede and oiled
nubuck shoes, and maintenance products and sponges used in shoe polish.
14. In order to enhance the export revenues of particularly marble exports,
opportunities for the establishment of marble processing facilities, if
necessary, through the building of joint ventures between two or more
Turkish firms.
15. Before making any endeavors to start business operations; always
determine target products and make appropriate decisions; and keep in mind
that penetration into the Chinese market will not be possible merely through
writing letters addressed to the names specified on the list of importers
consisting of several pages, to be received from the Office of the
Commercial Attaché or the Commercial Counsel; that personal efforts and
consistency in conducting market researches are key factors, and that the
opening of at least one representative office in China will be highly
appropriate.
16. If deemed as necessary, instead of wasting unnecessary time and money
in a market that is not very well known, cooperation with a mediator –including
Turkish mediators—in the market in consideration of a definite fee, should
not be considered as an unnecessary expenditure.
17. It should be noted that certain Turkish products with labels
containing Turkish flags are sold in the shelves in certain chain markets
such as Carrefour; and for reaching consumers, marketing and promotion
campaigns must be organized for the Turkish products in markets with high
profile
18. Advertisement and promotion campaigns must be launched to the extent
that the available financial resources allow.
19. In addition to the non-financial sector, in order to achieve a progress
particularly in the area of tourism, and to increase our tourism revenues,
certain popular travel writers and editors of China must be invited to
Turkey and must be presented promotion programs introducing various
aspects of Turkey and must be encouraged to write about Turkey in the local
media. .