New tactics to conquer China's domestic market

by Carmen To

FC Lo, vice president, The Chinese Manufacturers' Association of Hong Kong
Photo: Ringo Lee

To prosper in China, manufacturers must understand the local business culture

When Hong Kong manufacturers first started to move their factories to the mainland 20-plus years ago, they worked mostly on raw material processing for export. It was possible to take advantage of cheap labour and tax breaks, even though companies were not allowed to serve the domestic market.

However, with the tremendous changes in China's economy and the growth of a consumer class, manufacturers can't fail to notice the sales and business opportunities on their doorstep and want to take advantage of them.

"The key is to use our positive energy to adapt and assimilate according to the changed circumstances," says FC Lo, vice president of the Chinese Manufacturers' Association of Hong Kong. "We have to give the industries a new definition."

Explaining further, Mr Lo notes that many of the buildings previously operating as factories in Hong Kong have since been successfully converted to different uses. He says that this kind of transformation can be taken as confirmation that the manufacturing sector is well able to move with the times. The important thing is to remember that, to remain profitable, every business must keep adapting.

The key is to use our positive energy to adapt and assimilate according to the changed circumstances

Labour shortages

Referring to some of the factors most likely to affect business on the mainland, Mr Lo first advises companies to watch out for possible changes to the tax regime for overseas investors. He also points out the need to anticipate labour shortages in certain areas, especially for experienced staff with technical skills in specific industries.

"There are now more opportunities in different parts of the country and, if possible, workers prefer to stay closer to home, rather than moving to southern China to find jobs," he adds. "As levels of wealth increase, attitudes obviously change and, for example, parents become more reluctant to see their daughters going off to work in factories."

He also notes that anyone relocating from Hong Kong for work reasons must be sensitive to cultural differences and learn how to cope with them. That will give them a competitive edge and allow them to settle in smoothly and make a more significant contribution to their companies.

"We should realise that China knowledge is still a valuable commodity and should give full support and encouragement to people in business who want to acquire it," Mr Lo says.

Local experts

If Hong Kong-based manufacturers hope to expand their share of the mainland's domestic market, they must also start recruiting locals with specialist knowledge of how things work on the ground.

"There is always the chance that such individuals will be difficult to control or will later set up a rival business," says Mr Lo. "However, that is a risk anywhere and simply means you have to assess the candidates very carefully."

His general advice is that you have to apply yourself to learning how things are done in China's business culture. That knowledge will be an increasingly important asset for employers and will soon be a prerequisite for climbing to the top of the career ladder.


Taken from Career Times 01 September 2006
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