The Business of Doing Business in China
The country’s role in the crop input industry is critical. Finding the right partner to get work done in China can be a challenge. Here are some thoughts from people both inside and outside the country who succeeded.
Scroll Down to Read
By Dan Jacobs
Senior Editor
Conversations about China usually focuses on the country’s role as a supplier of both finished products and intermediates to companies outside its borders. Less common does the discussion explore the reverse – selling into China.
To succeed in selling into the country, a business needs to find the right partner. AgriBusiness Global talked with executives on both sides border to find out how they succeeded in bringing business into China.
For CS Liew, Managing Director, Pacific Agriscience, the key is finding and developing a relationship with an in-country agent who works on behalf of your company.
“We sell foliar fertilizers and amino acids into China via an agent, which we have a long-standing relationship that dates back to the 80s,” Liew says. “The agent, after importing and repacking, would then sell to their provincial dealers and distributors.”
The stability of that relationship has been important to its ongoing success.
“We have this business model, which works well with the high-value and high-performance products that are going into the lucrative horticulture sector in China where performance is more important than price,” Liew says.
Culture Clash
Misunderstanding the Chinese culture can be a challenge for some companies looking to bring their products into the world’s second largest economy.
“We believe that overseas companies entering the Chinese market first need to accept the local culture,” says Prof. Jiaheng Zhang, Founder of ShineHigh Innovation, a Chinese advanced materials R&D and smart manufacturing company founded in 2017. “The Chinese market is not a blue ocean market, so the Top-Down mentality does not work in China. The huge market volume also means fierce competition. Overseas companies need to lower their profile and communicate with local Chinese competitors.
“In general, we focus more on value creation than on the pursuit of low prices,” Zhang continues. “Of course, a very good price/performance ratio is also one of the factors we consider.”
Right now, ShineHigh’s expertise lies in the beauty and cosmetics area, but the company is exploring agriculture, which Zhang admits has not been easy.
“Venturing into agriculture is a challenge we are facing,” he says. “In the process of selecting partners, our primary criterion is how strong the partner’s need for innovation is. We select partners based on their competitive strategy in the target market. We generally ask potential partners the following question: ‘Where do you want to be positioned in your target market in the next 10 years?’ If our potential partners are looking for innovative portfolios that will lead the market to sustainable development, such as sustainability in agriculture, carbon neutral goals, reduction of agricultural inputs, and more efficient and safer pesticide branded products for farmers, then they are the best candidates for us.”
Innovation is only one factor the company considers.
“Then it comes to the importance that partners place on product assets,” he says. “Product assets are very important to global crop protection companies. For example, Corteva utilized a sustainable approach to realize the reinvention of 2,4-D to obtain 2,4-D Choline. 2,4-D Choline improves efficacy while reducing field use, achieving near zero volatility, and reducing eye irritation. Multinational companies could extend the life cycle of their products through continuous innovation of their product assets, while maintaining their competitiveness in specific target markets.”
Given the nature of what it does, ShineHigh’s executives understand that working with organizations that develop new solutions and provide new tools is critical to future success.
“For ShineHigh, our cooperation with overseas companies is mainly based on long-term supply agreements for innovative materials,” Zhang says. “Since we have our own production facilities, we prefer the cooperation model of patent technology innovation and patent raw material production and supply. However, we do not exclude licensing agreements. After all, our customers are many and varied. We would like to develop a customized cooperation framework based on the needs of our customers.
“In the process of cooperation with multinational companies, cooperative R&D is also an important mode of cooperation for us,” he continues. “We believe that it is crucial to lay out shared patents from the R&D stage. This is not only conducive to the sustainable development of our enterprise, but also to match the end-market competition strategy of our clients and help them to lock the layout of portfolios with great development potential in the future in the early stage.”
Governmental Regulations
Another consideration companies interested in doing business in China must maneuver is that government’s evolving business and environmental rules.
“Over the past few years, our business relationships in China has evolved significantly,” says Dr. Piyatida Pukclai, Asia-Pacific Regulatory Policy and Sales Manager for Knoell. “We have seen increased demand and success in the regulatory consulting sector, especially given the stricter regulations in China, particularly in environmental risk assessments. Our expertise in addressing requests related to Environmental Fate and Modeling, as well as Environmental Risk Assessment, has proven to be crucial. The demand for our services has grown considerably, reflecting the evolving regulatory landscape and heightened awareness of environmental considerations.
“It’s critical to highlight that the regulatory landscape for registration in China is highly intricate and poses significant challenges for companies seeking entry into the market,” she continues.
“The labyrinth of extensive data requirements, language barriers, procedural intricacies, and nuanced regulatory expectations all underscore the formidable challenge of regulatory navigation. In this complex environment, having a dependable local partner with expertise in compiling necessary data, facilitating communication with authorities, and ensuring alignment with China’s regulatory standards becomes paramount for success,” says Pukclai.
In recent years, China has shown it’s no longer interested in just delivering raw materials to companies invested in innovation. Many of the country’s providers have invested in innovation, meaning that a company looking to do business in China needs to be at the top of their game.
“The ability of local Chinese R&D and innovation is being channeled through the supply chain to Chinese B2C brand owners,” Zhang says. “Such status is also occurring in the agricultural sector, where Chinese agrochemical companies already can have absolute dominance in their market segments with a single product. The product power of Chinese companies will continue to increase as Chinese R&D strengthens. This is the most important piece of advice we would like to share with overseas companies that are about to enter the Chinese market.” •