So you’re thinking about trading chemicals in China. Well, who wouldn’t? The spectacular rates of growth seen there over the last 20 years have raised everyone’s eyebrows. And whilst there is some uncertainty over the state of the economy today, according to the Wall Street Journal 2015 still saw GDP grow by 6.9%.
The figure for chemical industry growth for the coming years may well be much higher given that, according to a recent PWC report, “Global sales of chemicals more than doubled over the last decade, hitting a record US$5.2 trillion by 2013 (americanchemistry.com). Emerging economies drove a large share of these gains, most notably in China, where chemicals sales expanded at an average compound annual rate of 26 percent over that period.”
The huge expansion of megacities has caused demand for chemical raw materials on an unprecedented scale. Added to that is China’s enormous manufacturing output of everything from clothing to food stuffs, from electronics to cars. China needs chemical suppliers.
So what do you need to know to gain access to the Chinese chemicals market? Well here are a few tips.
- Find a Chinese Chemicals Trading Partner
The first and most important thing anyone hoping to trade chemicals in China can do is to find a local partner. The best partner will be an established Chinese-owned chemicals company, or a businessperson with good contacts who can navigate the complicated regulations and legal processes and perhaps most importantly, deal with the Chinese government directly.
As Peter Adriaens, a professor at the University of Michigan’s Stephen M. Ross School of Business and a professor of entrepreneurship at Sichuan University’s Suzhou Institute in Suzhou, says “It’s not like you just get money and a product and you’re up and running, like in America,”
A good partner may be an incorporated company that is about the same size as your business, it should be at least partly Chinese-owned, and well-connected in the Chinese chemicals market, Adriaens said.
Many firms wanting to access the Chinese chemicals market locate a partner through an online marketplace such as Spotchemi.eu. This website (which hosts this blog) enables you to find a buyer or seller for any chemical product you want. Plus it has a huge database of chemical buyers and sellers which can assist you in finding the chemicals business partner you need.
- Understand the Business Culture
China is culturally a long way from America or Europe, and more than a world away when it comes to doing business there. In America, contracts, deals and other arrangements are fairly transparent between businesses working together. This is less true in China.
Shan Nair, co-founder of Nair & Co. (now trading as Radius) a service outsourcing company, said that understanding how Chinese business culture works is vital for anyone who wants to trade there.
“If you know what you’re doing, it’s not hard, but if you don’t know what you’re doing, it can be time consuming and expensive,” Nair explained. “There are some complications, but if you’re in contact with someone who is used to the obstacles, it can be quite straightforward.”
Again the need for a Chinese partner or someone who knows the chemicals market is important.
- Understand the Bureaucracy
China is famous for its complicated bureaucratic web, and it has gained a reputation as a place where deals and contracts are often treated more like suggestions than concrete agreements.
In recent years, however, the Chinese chemical industry climate and regulatory structure has improved, and experts and business people say that with a little effort and knowledge, chemicals trading in China is now easier than ever.
- Innovation
There was a time when people asked if China was innovative, but not anymore. Today, Chinese chemists are at the forefront of scientific research, and the global impact of that innovation will be increasingly visible. Whilst hundreds of midsize companies in the Chinese industrial chemical sector are providing ever-more-serious competition to Fortune 1000 competitors.
They are no longer focused simply on cheap, and have an increased understanding of the importance of quality and reliability. They are also a growing force in the speciality and bespoke chemical sectors, as well as taking larger market share in biotech, pharmaceutical and medical technology.
To stay competitive in this area, ensure your chemical products are of the quality being looked for. Whilst it can be tempting to trade in cheaper standard items, quality does show and China is now looking for quality.
- Corruption
Whilst corruption has uptill now been a major problem in China, businesses will now need to recognize that anti-corruption initiatives and the rule of law are now long-term foundational elements of the political leadership’s platform. President Xi has consistently declared the objective of advancing the rule of law.
Such openness is a blessing to those wanting to break into the Chinese chemicals market. It is creating a fairer playing field where the best quality and best priced chemicals get the deal.
China is no longer the Wild West of the chemical industry that it was before, but it is still a land of opportunity for well-informed chemical traders. You can take advantage of globalization to sell your chemical products, and with the right help, it won’t be as scary as you think.