MSMEs from developing countries make inroads into China’s market
Rapid growth and rising domestic consumption have propelled China to its current status as the world’s second-largest economy, as well as its second-largest importer. But while Chinese demand presents enormous economic opportunities, micro, small and medium sized enterprises (MSMEs) from developing and least developed countries (LDCs) often struggle to export to China.
Exporting to any market involves costs and efforts beyond those incurred when selling domestically. These include adapting products to meet target market preferences and standards, travel to meet potential partners, and the need to manage linguistic and cultural differences.
Large companies selling into China might recruit local staff or hire specialized support services for accessing the Chinese market. For many smaller companies, however, such expenses may be out of the question. Even MSMEs selling otherwise competitive goods and services might not understand how to customize them to appeal to Chinese buyers. Rather than an inability to supply a quality product at an attractive price, it is insufficient understanding of buyers’ needs and the absence of a business network that keeps many MSMEs from breaking into China’s market.
ITC has worked since 2014 to promote trade between China and other developing countries. These efforts have focused in particular on enabling MSMEs in LDCs in Africa and Asia to benefit from Chinese demand and investment, through a combination of advisory support, technical training, and business networking.
When the Chinese government organized the first China International Import Expo (CIIE) in November 2018, one of many moves to bolster the world-leading exporter’s profile as a destination for imports, ITC was well-placed to support companies to make inroads into the Chinese market.
ITC identified close to 100 MSMEs from Bangladesh, Bolivia, Cambodia, Ecuador, Ethiopia, Kazakhstan, Kenya, Kyrgyzstan, Lao PDR, Mozambique, Myanmar, Nepal, Nigeria, Rwanda, Tajikistan, Thailand, Uganda and Zambia, working in three sectors: food and agricultural products; apparel, accessories and consumer goods; and services such as tourism.
Companies were identified based on their readiness to export, their potential to export to China and their willingness to share the costs of participation.
It is noteworthy that in assembling the delegation, ITC drew on networks associated with seven different projects involving four funders, achieving synergies in the form of enhanced value for money in terms of trade promotion support.
In the run-up to the CIIE, which brought to Shanghai 150,000 international and domestic buyers as well as exhibitors from 100 countries, ITC supported the enterprise delegation with registration assistance along with e-learning courses and advisory services on export sales and negotiation, cross-border contracts, transport and logistics, and trade fair participation in China, including business-to-business matchmaking with potential buyers.
At the fair, experts from ITC promoted the companies and supported them during the preparation and signing of letters of intent to do business with China-based buyers and investors.
At the CIIE, the ITC-supported business delegation reached prospective deals to supply merchandise and services to Chinese importers worth a total of $116 million.
Zambian agribusiness firms concluded letters of intent to supply pork, rice, and cashews worth tens of millions of dollars to counterparts in China. Companies from Ethiopia, Kenya and Rwanda struck tentative deals to export coffee and chilli sauce to Asia’s largest economy. Five companies from Tajikistan have agreed to supply cotton yarn, socks, sportswear and felt slippers to Chinese importers. A company from Bangladesh selling natural cosmetics has shipped $350,000 worth of products to a Chinese buyer thanks to contacts made at the CIIE. Bolivian companies are set to sell quinoa, beans and dehydrated fruit into the Chinese market. One of them, selling grains, beans and seeds, completed a $150,000 deal with a Chinese buyer. Tourism operators in Myanmar and Nepal are poised to start catering to the growing number of globetrotting Chinese tourists.
Many of the participating companies were pleasantly surprised by their success at the fair. ‘The exposure we have had in CIIE is wonderful and is beyond imagination,’ said Swoyambhu Ratna Tuladhar of Yak & Yeti Enterprises, a Nepali handicrafts company that was showcasing its products internationally for the first time. Daisy Sandu, who runs Daisy Meat in Zambia, called it a ‘game-changing opportunity.’
Some said that sales deals aside, the exercise of coming together as a group had been valuable for the participating companies, since they were able to exchange experiences and learn from each other. Pablo Palacios, a manager at Southern Expeditions, an Ecuadorean sustainable tourism company, said that being part of the ITC-supported delegation had opened his eyes to how tour operators in other countries faced similar problems. ‘For us, this process was an important learning experience about Chinese business culture, a place to exchange ideas and enhance our network,’ Palacios said.
China has announced that it will hold a second edition of the CIIE in November 2019. ITC will bring another delegation of 100 MSMEs in sectors including processed foods; apparel; consumer goods; tourism; education; and information and communications technology to the fair.
In the meantime, ITC is providing technical support to companies that attended the 2018 fair as they work to see prospective deals through to fruition. Based on their experiences, ITC will also develop recommendations for how companies could further enhance their export prospects in China, with practical recommendations about identifying products and engaging with prospective buyers.