Ispo forum on doing business in China attracts huge crowd

With a growing interest in doing business in Asia — called by some the “most dynamic and promising” market — the ispo show’s forum on exporting to China drew such a large crowd that organizers had to move it to a larger room at the last minute.

The bottom line, China is fast-moving and open to changes and Western brands.
China is also evolving from being mostly a large producing power to a huge consuming power. But only those who approach the market in a savvy manner will be able to tap into the potential.

That was the message to the about 100 attendees from all realms of sporting goods, including outdoor and fitness, in a day of lectures by representatives from Deutsche Bank Asia, shipping specialist Kuehne + Nagel, the legal firm Taylor Wessing, and advisors Euro Asia Consulting.

Two of the four speakers were clear that a business can’t just march in without first becoming familiar with Chinese ways. A Chinese saying was mentioned by two of the four speakers: One bed, two dreams. Translation: Don’t expect your business partner to be familiar with your behavior and wishes. If you want to sell your goods with the help of a distributor in China, think about the dreams your business partner may have.

• Make yourself familiar with customs and expectations. For example, don’t invite your business partner to a fancy Western restaurant when he invited you to a Chinese restaurant first.
• Always keep in mind the way politics in China weighs down all areas. For example, there’s the shaky situation where Chinese banks have to give most of their credits to government-owned companies without being offered any securities.
• Realize that trade and custom laws vary from region-to-region, and so do mentalities. Contracts should be well worked out by lawyers with profound insight into Chinese law and mentality, even if China is now a WTO member and trade legislation has been positively changed.
• And, last but not least, recognize that foreign companies as of 2005 will be allowed to set up their own businesses in China without having to rely on Chinese partners.

Some background: China has approximately 1.3 billion inhabitants, many of whom became “nouveau riche” just during the last few years, as the speakers put it. The bad news: 68 percent of the population still earns less than USD $82 a month and are, as one Asia expert puts it, “digging the earth for roots.” Still, with such a huge population, large numbers are earning more — 77 million Chinese earn more than USD $485, which is around $1,700 in real value in the open market. Annual growth is around twice that of United States or European Union figures.

But the growth potential is focused mostly on the large cities such as Shanghai, Guangshou/Shenzen, Chongqin and Beijing. The hinterland suffers from immense infrastructure problems, called “challenges” by the speakers at the forum on the last day of the ispo show (July 6). Outside the main cities, there is little purchasing power, and it is an area that tends to be very conservative in its consuming behavior.

Ispo China could be the springboard for first steps into the market. But planning ahead will be key since exhibitors will face numerous challenges in bringing their cargo to the halls, including an expected hold-up of about three weeks to clear customs. In addition, Chinese agents seem to be present almost everywhere around China to help foreigners deal with customs authorities, local administrations and distributors. Plus, goods have to be brought back in the identical packing material as they where brought in – and don’t even think about selling your stuff after the show without first filling out a whole bunch of forms. The step of starting the import business with a local distributor is another challenge. Picking out Mr. Right from the masses of agents can be a long, Herculean task full of ceremonial, traditional, political and religious hurdles, albeit not impossible (think Columbia, Johnson Health Tech, adidas and Nike, to name a few).

SNEWS® View: Although a helpful look at the future of the China market, the forum was partly designed as a promotional tool for the new ispo show in China kicking off in March 2005 (see SNEWS® story, “New ‘ispo China’ takes outdoor, fitness to growing Asia market,” Feb. 2, 2004). That’s not a bad thing, since advice about new markets is needed, just something to be aware of. If companies think they can just waltz in, they have another thing coming. As one insider put it about social imbalances and different cultural traditions there, “China is wild!” One of the sporting goods insiders we ran into after the forum was deeply skeptical about the notion that a company should attend a trade show as its first step into China, even a middle-sized company. Perhaps just a few brand stores and some advertising will do fine, and you can always look around and learn by yourself, if you can research soundly enough to find really trustworthy local people (interpreters, lawyers, import/export experts and the like) AND if you never relinquish personal control even with language barriers. Insiders say the ispo China show may just have one shot at success. If the show falls flat or success by attending companies is limited, the companies (and the show) may not be back for awhile. Nevertheless, the show may be more about giving the smaller and middle-sized companies an unusual opportunity to capitalize on a growing market.