Recovering China provides opportunities to diversify export markets
Difficult times require urgent action, but also prudent decisions to mitigate risks, for example, by diversifying export markets. Although China may still seem like a distant market for Estonian entrepreneurs, it is one of the first countries to show signs of recovery from the crisis and, therefore, it provides opportunities for enterprises in many fields, from food and beverage producers and cosmetics enterprises to service exporters.
The last months have been a serious challenge for enterprises both in Estonia and elsewhere in the world. Supply chains have been disrupted, commuting has become complicated, contracts on the verge of signing have been put on hold, and enterprises have been forced to look for alternative solutions due to difficulties. It is becoming increasingly understandable that in order to survive the crisis, it is vital to diversify both export markets and partners to ensure that the whole business would not collapse if one partner disappears. Whilst most of the world is still battling with the coronavirus and the resulting economic difficulties, the Chinese market is one of the few that is showing some signs of recovery and, therefore, it has become particularly important to us in connection with both exports and imports.
Due to the coronavirus, the Chinese economy has moved at a declining rate in the first months of the year, which is also expressed in the 6.8 percent decline in GDP in the Q1 of the current year. Despite the difficulties, positive trends have been observed in China since March, as the demand for beauty products has increased and consumer interest in clean food and beverages is growing, and this should be excellent news for Estonian entrepreneurs. Health is valued even more than before, and with the normalisation of daily life, people have started to pay increasingly more attention to their appearance and health. Even before the crisis, Chinese consumers formed one of the world’s most e-commerce oriented target groups – a trend that has only deepened in recent months. While overall consumption decreased by 15.8 percent in the Q1, sales through online channels increased by 6.8 percent. The skilled and innovative marketing activities of entrepreneurs also played a role here in order to reach their customers through online channels. The importance of e-commerce has risen to an unprecedented level in China. In Estonia, the value of e-commerce transactions amounts to 2 percent of our GDP, whilst in China the same figure has reached 12 percent of GDP. In March, the average Chinese consumer spent every fourth yuan online, which is illustratively comparable to a situation where every Chinese spends 2 euros every hour around the clock throughout March.
Therefore, cross-border e-commerce provides large-scale opportunities to enter the Chinese market. To facilitate this, the Chinese government has established a system that allows, for example, cosmetics manufacturers to reach Chinese consumers without conducting animal testing. Until now, such a mandatory requirement has been morally unacceptable for Estonian cosmetics manufacturers, and from now on, it should be easier for our eco-cosmetics manufacturers to place their products on the market with very high demand.
Cross-border e-commerce has enormous potential in a post-crisis world. It is easier for Estonian entrepreneurs to enter such a huge market by cooperating with each other, rather than competing there. Joint development of sales channels contributes to significantly expanding the customer base and better achieve success. Therefore, Enterprise Estonia is currently mapping out the ways to support Estonian manufacturers most effectively in approaching the Chinese e-commerce platforms. The marketing of Estonian enterprises in China through the WeChat platform has already been launched. A crisis situation requires a rapid response and resolution of problems.
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The new situation has also encouraged us to make changes in the activities of Estonia-Asia Trade Agency. We are making even greater efforts to support the export ambitions of Estonian enterprises and to share the latest information on the situation in China. We have assisted Estonian food producers in concluding new transactions, helped to review large-scale contracts, sought partners for our food producers and technology enterprises, and supported enterprises in various sectors in resolving different concerns. To provide the best assistance, we have expanded our services so that we can give maximum support to enterprises to increase their export volumes in difficult times, especially outside Europe. We have noticed an increased interest and need to import products, machinery, and raw materials from China. To this end, we have also offered our contacts and knowledge to enterprises that are struggling with background checks of potential partners. The Chinese market has become a ‘seller’s market’, meaning that business risks have increased due to the growth in demand – the advance payment reaches 100 percent and the speed of delivery of goods determines a higher price. Chinese standards differ from those currently followed in the European Union, therefore, before placing an order, one must make sure that the details are correct, especially when ordering personal protective equipment. All these challenges have provided Estonia-Asia Trade Agency with an excellent overview of how to support and assist Estonian entrepreneurs in communicating with Chinese partners.
Surviving in a crisis situation requires creative thinking and noticing new opportunities. The Chinese market is most certainly one of the most promising ways to boost exports, however, it requires thorough preparation and considerable investments in time and money. Before entering the market on their own, those who are interested should first talk to our experts, do their thorough preliminary work, ensure the protection of intellectual property, and make the necessary registrations. It does not matter whether one is engaged in e-commerce or the export of physical goods, Estonia-Asia Trade Agency always supports Estonian enterprises at every step.
If interested, please contact:
Export Adviser for China of Estonia-Asia Trade Agency
Project Manager for China of Estonia-Asia Trade Agency
Head of Estonia-Asia Trade Agency
The project is co-funded by the European Regional Development Fund.