General Information About China
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. .