China and the UK enjoy a mutually beneficial trade relationship, and although China serves a large receipt for UK exports, there are ongoing challenges relating to market access for UK business in China. But is conducting business in China getting more challenging asks Alexandra Kimmons?
Approaching the China market can be overwhelming, especially for small businesses. It is necessary to weigh the costs and benefits of trading in a new country and a new business context. HR, customs challenges, different business cultures, and other considerations can be a lot to work through.
However, Kevin Shakespeare, director of stakeholder engagement at The Institute of Export & International Trade, says that many of the areas that give businesses reason to pause when considering trade with China – such as inspection certificates – will soon also apply to trade with the EU. It is something that all exporting businesses will have to get used to and prepare for, so China will not necessarily be significantly more complex than any other export market.
Many of the areas that give businesses reason to pause when considering trade with China – such as inspection certificates – will soon also apply to trade with the EU
One of the most common concerns among businesses interested in China is that of intellectual property (IP) protection. St. John Moore, Chairman of the British Chamber of Commerce in China, says that for many years, IP has featured among the top three areas of concern for UK companies responding to the Chamber’s surveys. However, last year, it dropped out of the top ten, indicating that businesses operating in China are becoming less concerned with IP issues as the Chinese government implements more regulation to confront counterfeiting. “As long as businesses take a thoughtful approach to IP, it should not hold them back,” he says. The same can be said for many of the market access challenges facing businesses in China.
Companies looking to enter or expand within the China market will need to explore the different regulations, registration processes, and rights protection strategies that apply to their business, and learn about China’s unique commercial environment, including different payment methods and market leaders. E-commerce and social media both drive consumer spending and if companies are looking to produce sales in China, they must be willing to invest in understanding and building a strategy around China’s key e-commerce and social media platforms. Even if on-the-ground development in China is still a few years away, businesses should familiarise themselves with the commercial environment and look at making initial enquiries into areas such as IP now, in order to help protect their businesses later on.
Specific areas of opportunity for British businesses include green energy, legal services, education, consultancy, finance, and cross-border e-commerce. Kevin Liu, head of China and head of energy Asia Pacific for Scottish Development International, says that there are opportunities for the UK and China to draw on one another’s strengths in specific areas such as offshore wind technology, and that “China is looking towards the UK to resolve these questions.”
There has also been increasing inbound investment into the UK from China in recent years. Damon Peng, regional director, East and West China of Invest Northern Ireland, says there has been strong inbound investment in the technology and education sectors in Northern Ireland in recent years. There has also been “a dramatic increase in food and drink exports to first- and second-tier Chinese cities too.”
Kevin Liu also says that there is great potential for boosting trade between China and Scotland, as Scotland currently accounts for less than one percent of UK-China trade.
Chinese students in the UK continue to be an important factor for international investment and student visas have been a key indicator of UK-China diplomatic relations in recent years.
The British Chamber of Commerce in China’s Position Paper 2020, highlights the need for a robust, long-term strategy for UK trade with China, and suggested that China must be a priority for a Free Trade Agreement (FTA). UK products and services are well regarded by Chinese consumers, however, amid ongoing global tensions and following Brexit, there is a need for a comprehensive approach to supporting ongoing trade between China and the UK.
In addition to supporting the need for an FTA, Guy Dru Drury, the chief representative for China, North East and South East Asia at the Confederation of British Industry, says that university education is the soft power association with this exchange and a “core asset” to UK-China relations. Chinese students in the UK continue to be an important factor for international investment and student visas have been a key indicator of UK-China diplomatic relations in recent years.
The British Chamber of Commerce in China’s Position Paper 2020 also notes that British businesses are “cautiously optimistic,” when it comes to relations in a post-Covid-19 world. Whilst current events have posed temporary challenges to conducting trade with China, the paper highlights recent positive steps regarding trade, regulation, and market access for UK businesses in China. As companies around the world work on overcoming challenges posed by the global pandemic, it is important to engage with China, to read past the headlines, and act on the wealth of experience of British businesses already operating in China.
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