By Peng Di, Director of China Telecom France – In 1978, Deng Xiaoping gave a new economic direction to China, with his policy called “reform and openness”.
His ambitious program encouraged the country to take part in world affairs, taking active participation in many trade and economic organizations and becoming a leader in international cooperation.
The result is strong growth of 10% on average per year for 30 years and a positioning among the leading economic powers in the world, an industrial center and the world’s leading exporter, posting the 2nd largest GDP in the world.
China has established itself as essential for a large number of sectors that source their products there. Today, it is the first trading partner of the European Union. In 2020, €586 billion of goods were traded between China and the EU, representing 16% of EU goods trade.
Soon to be the world’s leading power
Second world power currently, China is on the way to becoming number 1, and the Asia-Pacific region is just as promising. Since the 1980s, foreign investment has exploded in China, particularly in Economic Development Zones (EDZs) with preferential trade policies and in free zones that promote free trade and capital movements, with their exceptions to procedures. standard customs duties and tax exemptions or incentives.
These economic zones, among others, have contributed to reducing the poverty rate in China and increasing the purchasing power of the population. Many international brands have seen the opportunity to penetrate a vast market.
In 2001, China joined the World Trade Organization (WTO), confirming its status as a major nation in international trade thanks to its liberal investment policy. During this period, sectors such as Telecommunications, Finance, Insurance and Commerce opened up to foreign investment.
European companies enjoy a good reputation for their know-how, which facilitates sales in China. However, this market is far from easy to penetrate, constituting an enigma for those who do not master its codes, its culture, and its regulations.
To ignore it is to run into failure. It is necessary to know this market in depth before approaching it. In addition to market studies which will give an overview of the economic realities, competition and possible partnerships, it is necessary to appropriate its legislation, its taxation, the profile of the customers, the channels of promotion and the rules of export. Businesses need to be flexible to adapt.
The strategy of investing in major Chinese cities like Beijing, Shanghai, and Shenzhen is not the only path to success. Some companies have been established there for many years, the competition is fierce and continues to intensify. Investing in smaller cities that are growing rapidly can make sense as many of them have a population comparable to that of smaller European countries.
It’s a real headache for small and medium-sized businesses. According to a study by the German Chamber of Commerce in China, there are also problems with Internet connections, a shortage of qualified employees, protectionist measures and a lack of legal certainty.
The Internet in Asia-Pacific, a challenge
The regulations in China and Asia-Pacific are very different from the European regulations. Critical applications may be either inaccessible or restricted if all rules are not followed.
All European companies that open offices in China are faced with the same problem: allowing employees in Asia to access data from the European headquarters while ensuring the security of this data, which can be sensitive.
In China, due to regulations, many applications or websites are inaccessible or work in a restricted way. This is the case of Microsoft 365 and Microsoft Teams, which are essential for European companies. This dysfunction hampers business efficiency, especially in the digital age.
The major international operators are there to support companies in their apprehension of the Chinese market and to help resolve this type of problem. Another pitfall of the Internet in Asia is the loading speed, distances can be long.
A CDN, content distribution network, with points of presence (PoP) distributed over the territory, makes it possible to store content locally, in cache, to speed up loading times. Its effect is multiple:
- Improve page loading speed
- Reduce bandwidth consumption
- Strengthen security and protect sites once morest DDoS attacks
- Efficiently manage large traffic loads
Mastering the culture so as not to make mistakes
Cultural and interpersonal aspects are also success or failure factors. Companies that are insufficiently prepared for cultural differences can quickly take a wrong step. In China, it is not uncommon for the first meeting to have no other objective than to get to know each other, with business being discussed later.
In addition, when entering the Chinese market, it is important to know how intellectual property works, payment habits, corruption, and how to ensure consistent quality.
You don’t import your culture to China, you have to blend into Chinese culture. Many books and studies have focused on the subject and guide foreign companies or expatriates to avoid making mistakes. What is valid for China is also valid for many countries in Asia Pacific.
Guanxi 关系: the key factor in Chinese trade relations
The Chinese are particularly sensitive to interpersonal relationships in the workplace. “Guanxi” can be translated as “relationships,” although no translation fully captures this complex term at the heart of Chinese culture. In the business world, Guanxi refers to the strength of network and relationships. A person with significant Guanxi will be able to open more doors in the Chinese market, and relationships with business partners, suppliers and employees are crucial for success.
In China, it is normal to involve your relations to advance a case. Maintaining the link helps to minimize delays, and to understand what might be causing them.
Business cards: a basic element of commerce in Asia
In Asia (China, Korea, Japan), business cards are generally exchanged at the first meeting, whether formal or informal. They are bilingual: in the local language on one side and in English on the other. East Asian countries attach more importance than Europeans to the collective and to the company to which they belong.
It is polite to accept them with both hands and study them carefully. Taking the business card and immediately slipping it into his pocket would be perceived as an insult to the person and to his position. The given cards must not be bent or damaged and they must not be distributed as in a game or put in the pile for everyone to use.
The format of business cards differs from country to country. In many Asian countries, people are called by their surname, not their first name. Politeness dictates that we use people’s last name and full title until we are asked to use their first name.
Comply with regulations
The regulations in mainland China are the most complicated for international companies. She might fill an entire library.
Authorizations and regulations for Internet, cloud and cross-border networks
Telecommunications companies operating in China must be authorized to do so, several permits being issued depending on the type of service offered: a basic permit for providers of public infrastructure, public data transmissions and basic telephone communication services, a permit for added value for operators who use public networks to deliver their telecom services, a permit for Internet services, with nuances depending on whether or not these services are for commercial use.
Ministry of Industry and Information Technology (MIIT) rules state that if a foreign or multinational company needs to connect to Internet services for its own use, it can legally rent and use leased lines (including VPN) from traditional telecommunications operators. A company must be careful not to sublet or subcontract these dedicated lines and must be managed in a closed circuit to avoid any external use.
Data protection in China
Europe is not alone in having complex rules on cybersecurity and data protection, the consequences of breaches being just as important.
The China Cybersecurity Administration (CAC), MIIT and the Ministry of Public Security, which manage cybersecurity, distinguish three categories of data for which storage in China is mandatory:
- sensitive infrastructure data: this is data from important sectors such as public telecommunications, energy, transport, finance or other, whose data compromise might threaten the public interest. Their transmission abroad is closely studied.
- data collected and managed by Level 3 or others under MLPS: MLPS stands for Multi-Level Protection Scheme, a cybersecurity system to protect and monitor all computers or other terminals to collect, save, transmit and process information by grade.
- special data: for example, party or government data collected or processed by cloud providers
Cross-border data transfers are subject to the consent of the data subject.
Improvisation is out of place in China and Asia-Pacific. We do not simply copy and paste our European model, with translation into the local language. You have to anticipate and prepare well for your arrival on this market.
The major international players are trusted, experienced partners who provide comprehensive support, where nothing is left to chance.
Peng Di, Director of China Telecom France
