Will the Chinese market become more open to small foreign businesses?

By Mikko Teng

China recently announced that it will further lower the market access thresholds in areas like banking and the securities industry to attract more foreign investment. The aim is to promote the steady growth of foreign investment in China’s pursuit of a better business environment.

Market entry barriers will be relaxed in specific areas like new energy vehicle manufacturing, ship design, aircraft maintenance, gas stations, artist booking agencies and insurance.

This is definitely good news which gives foreign investors more choice when it comes to investing in the country especially for multinational companies. At the same time, an increasing number of overseas small to medium-sized businesses are eyeing the lucrative Chinese market against the backdrop of economic stagnation worldwide.

To some overseas companies, commercial opportunities in China not only mean money but also the means to rejuvenate their flagging fortunes.

China has opened its market steadily since its economic reforms over 30 years ago. The society has since transformed from a state controlled central planning oriented economy to a consumption oriented market economy.

This is particularly true in large cities. To meet the ever-growing consumption demands by an ever growing middle class as well as the fashion sensitive young consumers, an even larger variety of services and products have to be tailored to satisfy these needs.

Some small sized foreign businesses may have an important role to play in giving Chinese consumers what they are longing for. These small businesses may possess only one simple advantage such as a particular design, an exciting idea, a creative recipe, a useful solution, or some special skills and talents. But they are able to give that extra something to boost the variety of services and products available in the Chinese market.

These small foreign businesses are also hoping for further relaxation policies by the Chinese government to lower the entry barriers of starting a business in China. The worries and risks of possible failures faced by these small businesses are not necessarily major problems. Chinese consumers and markets will decide the fates of these foreign services and products.

It is common knowledge that the growing-picky Chinese consumers will not warmly receive all of the designs, ideas, recipes or talents; but many will have good opportunities of success especially if they are able to face less market entry barriers in China. These official barriers include financial restrictions for establishing a business; long custom inspection periods for importing certain products; and some strict visa requirements to receive work permits.

It is highly expected that more and more foreign small companies will be serving Chinese consumers particularly in urban China. Some areas such as education and training, medical services, elderly health care have already gained a superior reputation in the market.

Some foreign skilled workers are also filling in in the catering and fashion sectors. Many artists are performing on Chinese stages at different levels, and there are more and more cultural and sports exchange activities organized through both official and nongovernmental channels.

These small companies may not be extremely useful in meeting the Chinese state’s long term aspects in developing infrastructure projects for western or northeastern China, but they can be key players to richen the daily life of urban Chinese consumers by offering a variety of interesting services and products in addition to what have been provided by Chinese local suppliers.

China is opening its market to welcome the world and the world has opened its markets to both Chinese products and investments as well. Chinese tourists are highly respected due to their consumption power both domestically and internationally. These small foreign companies are able to provide some of the service experiences right in front of Chinese consumers in China which would be otherwise only possible abroad.

China is transforming its patterns of economic growth, aiming for more sustainable development. There are many opportunities and challenges for foreign companies during this process. The government could also tailor its investment policies to keep smaller companies coming and serving the Chinese consumers.

The author is a Finn originally born in Beijing, China. Graduated from University of Helsinki, he is a lecturer in social sciences and cultural studies at the Beijing University of International Studies and Beijing Capital University of Business and Economics.