15 November 2021
Article

Wealth as Happiness. All You Need to Know about Strategies to Enter China

Wealth as Happiness. All You Need to Know about Strategies to Enter China
Content source: istockphoto.com

In Russia, people are used to perceiving China either as a mysterious thousand-year old culture or as a communist superpower where life and business stand in stark contrast to those in the familiar European world. But that image is far from reality.

The main key to understanding the Chinese, and especially Chinese entrepreneurs, is that they are extremely pragmatic. This simple idea sheds light on the country as an enormous market where business is done by people who know money’s worth and are ready to subordinate their own life and the lives of their employees to the most effective strategies of making money.

May money come your way!

A traditional New Year wish is 恭喜发财 (gōng xǐ fā cái)! And that wish is not about traditional European blessings such as happiness, health, and love. It means “I wish you a great wealth.” Doors are decorated with the hieroglyph 福 (fú) “wealth” that is often translated as “happiness” too. Meanings here are intertwined into an interesting and polysemous pattern.

To succeed in the planet’s largest market, entrepreneurs must think like the Chinese do—that is, as pragmatically as possible—and enter it with a straightforward and useful product accompanied by a clear marketing plan.

source: istockphoto.com

Profit as a goal in itself

Russian businessmen often hold a few mistaken beliefs about their Chinese counterparts. It is thought that with the Chinese one must conduct lengthy negotiations—as advised in Sun Tzu’s treatise The Art of War—and drink at business meetings, that one can only agree on something with the head of the company, and that all in all it is desirable to first become a friend rather than a partner. But the Chinese have changed a lot in the last decades. If twenty years ago working in China really required having people who knew the language and culture—“interpreters” in both direct and indirect senses,—now the Chinese themselves know foreign languages, and many of them have a business education. The number of Chinese students in the U.S. has grown almost threefold over 10 years reaching 370 thousand in 2020. In pre-pandemic years, China accounted for 35% of foreign students in the U.S., with up to 80 thousand Chinese students receiving MBAs from American universities annually. Those are very large numbers. And it is only natural that now Chinese entrepreneurs speak the same business language as any European or American does.

The Chinese can be more and more heard saying: “We have a business model, we create a value proposition, we do the right marketing, we study market trends.” And the “special friendship of peoples” that is often mistakenly counted upon by Russians will not be of any use here. “Russia and China are brothers forever” still remains an accurate Soviet-era slogan for personal relations, but has little to do with real-life business of 21st century. Although Russia may well be a very important neighbor for China and, possibly, its key geopolitical ally, Beijing will always remember that Russia’s entire gross product is approximately equal to the GRP of one of its provinces, Shandong. And thus, those who come to Beijing with an ambition to “provide for entire China because we are friends” risk being given a condescending and sobering look.

Talking on equal terms only becomes possible when your Chinese partner sees a potential profit from cooperating. Even in China, people do not need to get talked into an economically attractive project. And sure enough, no Chinese entrepreneur is going to sacrifice their profit in favor of some fleeting friendship. That is why Americans and Europeans are even more at ease in the Chinese market. They speak the same language of business models and profit.

source: istockphoto.com

Proactive business

There is another wide-spread mistake—people tend to think that China’s entire business is publicly owned, so connections and support from public officers is what matters the most. While Russia’s share of small and medium business in GDP is about 20%, China has this figure at around 85%. Small and medium business is the driver of trade and the heart of China’s economic miracle. So everyone who is ready to study the demand and consumers—and offer a demanded product on time—stands a chance of success in China.

For example, the Healthy Eva brand created specifically for the Chinese market was launched in the healthy baby food segment as a “quality overseas product.” Alex Vasilyev, the company’s founder, understood early enough that Chinese mothers preferred feeding their babies mainly with imported European products. The cleverly established e-commerce further contributed to the company’s success.

Children in China receive special treatment—a child is a small emperor. They get the very best. This knowledge was also used by Ainar Abdrakhmanov, entrepreneur and SKOLKOVO Startup Academy graduate. His company Babystep.tv started making quality educational videos for young mothers and fathers, and the product surged in popularity—the project had 50 million subscribers at its peak and was valued at $150 million. The idea was swiftly copied by other entrepreneurs who noticed how successful the startup was. Ainar’s next step—turning the project into a marketplace for children’s goods—readily failed, and not because it was a false move, but simply because his team lacked online trading skills at the moment. The competition was won by those who managed to adapt more quickly—Ainar himself gives an example of his competitors who started their business at the same time and had a revenue of $720 million in 2021.

When entering the Chinese market today, it is important not to mystify that country trying to find “guides” for culture and corridors of power. Leave that complicated game to large public companies. A good product, strong team made up of domain specialists, and the ability to skillfully navigate a competitive market—these things help get Caishen, the Chinese god of wealth, on any entrepreneur’s side in no time.

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