March Insight - G to B Strategies for the China Market-Business promotion in China by Western Government

Western firms in China, since the start of the Open Door in the seventies, have adapted and successfully matured to address the structural challenges to the bottom line that complexity and rapid changes in the marketplace are imposing.

Based on 20 years of participation in government trade promotion projects, Intercedent observes, many western governments, on the other hand, implement engagement based on an out dated premise that   developing personal relations with their counterparts in China is the key to commercial success in China.   This structural anachronism dates from pre-WTO planned economy, is self-serving to justify trips for elected officials to visit China, and,  due to the inertia of bureaucratic entropy, refuses to update its mindset to manage the new China.

In many instances trade development programs funded and staffed by western government business promotion agencies have not progressed with the times. This is despite the considerable level of interest and resources allocated at the national, state and municipal level to promote doing business with China. There are a number of reasons why.

The first priority is to reduce mission fatigue imposed on Embassies and state trade offices every time there is an election. This burden is the Marco Polo Syndrome inspired by the ego of western politicians who must take credit for discovering China after they are elected. This syndrome if not managed properly turns trade development officers into executive tour guides.

We acknowledge that a limited number of focused government to government exchanges at a high level are a protocol requirement in China. These meetings assist both sides to understand each other’s strategic needs quickly and prevent the development of a friendship deficit syndrome impacting on strategic commercial sectors-nuclear technology, aviation and in and outbound investment projects.  Likewise the spirit of national treatment under WTO, public tender laws, the growing distance between the regulator and state owned companies and the rise of the private sector mean that the Chinese government has, as it should, less direct impact on business decisions being made.

Despite western politicians claiming credit for friendship rewards gained during missions to justify the trip, the majority of sales of goods and services in China are now won and lost on hard work based on commercial factors of price, quality and service. Business acumen not politics seal deals a significant amount of time before the bi-lateral political window dressing of a signing ceremony. This means that the right balance on the ground in China is required. Politicians need to be deployed for problem solving specific company files or negotiate the final items in frame work agreements and treaties to promote trade and investment.  When they return home they should also remember to host their Chinese counterparts; but most critically improve the inter-ministerial co-ordination on the China files domestically. 

Politicians should not be in the make belief business of marketing.  It cheapens the political value of the visits, negatively links trade and investment to the emotions of the political rhetoric on both sides, and gobbles up the time of Embassies and trade offices that could be better allocated to helping companies.

How then do western governments help companies? The first step is to make sure the company is export ready! This can be done by designing and delivering a needs assessment survey to help them guide the development of their China strategy. Part of this process should discuss the merits of exporting directly, through partners, producing in China, or executing a technology transfer for the China market only.  One important question is whether the exporter is better off directing its marketing focus to another country. China is not everyone’s successful kettle of fish. This assessment is critical because a company needs to be competitive but also have the resources and mindset to take on the China market. The second step is to make sure they have internet pages and marketing material in Chinese. The third step is to introduce them to a number of advisers, importers, distributors and potential customers. Part of this process should be to make sure that the company’s business agenda and material are distributed to their Chinese counterparts prior to arrival.  The fourth step is to follow-up with the contacts in China and make sure that one specific business opportunity is hot and moving forward.

To do this effectively western governments need to consider the following practices. First, implement a triage process to only support a list of 100-200 qualified exporters or investment projects or market ready sectors. This process should be objective. In many cases political and trade promotion resources are allocated to projects in China that do not bring a substantial amount of benefits back home. The domestic political problem is that every Congressman or Member of Parliament puts pressure on trade promotion team to help all of their constituents.  Second, structure posting contracts for staff or diplomats to stay 4-5 years in a country and compensate this by budgeting more trips home to work with headquarters staff, exporters and keep in touch socially.  These officers should also rotate more frequently between the private sector and government. Third, develop performance agreements between the government agency and the exporter that stipulates government trade promotion officials are obligated to work with a specific number of exporters each year to work closely together to execute a specific project or achieve the first deal as part of a first market entry strategy.   This moves the process of promotion to a more concrete objective of deals that pay taxes and create jobs at home. It also shifts trade promotion to a more pragmatic level. Fourth, improve databases and access to databases by exporters. The major asset that a western government’s trade officials have is their name card box. These names that accumulate during a posting disappear internally or into cyberspace and are not accessible by the taxpaying companies at home who have the time and knowledge to manipulate these contacts into commercial success. Fifth, the expense and staff time devoted to the mission and the trade pavilion should be converted into next generation business networking through the internet, multimedia and advertising.  Sixth, trade offices and officers should notify their exporting constituency of key meetings and travel schedules within China in advance so that exporters can add their talking points. These changes are critical because western governments understand their economies are tied to their ability to develop international markets for SMEs. Seventh, western government should work with their private sector to fast track Chinese business visas.  

Finally, government marketing programs to China must acknowledge purchases are made based on brands or trust of a country’s industrial capacity in the sector and not by country of origin. Made at Home campaigns do not work at home and will not work abroad.  Western governments must work to reduce systemic trade barriers that exist in China in parallel with addressing their own allocation of resources so that allocation of tax dollars by foreign government in China convert into real deals.

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