While China is Australia’s biggest export destination, it’s a notoriously tricky market to enter – even for multinationals. So, how do export-driven Australian SMEs form lasting connections with Chinese customers? Dynamic Business spoke to Joe McGuire, Global Head of Sales & Partnerships with Airwallex, a Melbourne fintech start-up specialising in cross-border payments.
Dynamic Business: What is the appeal of China for SMEs?
McGuire: China is Australia’s strongest export market, accounting for almost 80% of all Australian export growth in 2013-14. As a country, we have an established business relationship with China which is helpful for SMEs that are looking beyond the local market. Additionally, the purchase power of the Chinese population is increasing – in fact, it’s predicted to double between 2010 from $4,000 to $8,000 in 2020, meaning more disposable income to be spent on goods and services.
Funnily enough, foreign goods are often preferred over local brands by Chinese customers, spurred by numerous incidents that have diminished trust in local goods. These past scandals have encouraged most Chinese consumers to equate foreign products with superior quality and safety, so there’s already a solid and established reputation for any foreign business setting up shop in China.
Dynamic Business: What local industries are at an advantage?
McGuire: Australia’s reputation in China harks back to the tourism advertisements that made Lara Bingle famous, highlighting Aussies as natural, healthy and authentic. Australian industries that produce products that carry or promote this sense of wellbeing are highly regarded in China – think dairy, honey, natural foods, skincare, cosmetics, supplements, cosmetics, maternity and baby products. China is Australia’s second largest market for pharmaceuticals such as vitamins and health care products, so there’s a great market opportunity there for businesses looking beyond Australian borders.
Dynamic Business: Why is China a difficult market to enter?
McGuire: The Chinese market truly dances to the beat of its own drum. Even for big multinational companies like Google and Uber, entering the market there has been haphazard and trying. There are a few reasons for this, one of them being that doing business in China is very relationship-driven.
Businesses need to build strong, direct relationships with local partners as well as customers, specific to each region in which they choose to conduct business. It’s an intense and rather unique process that can be tough for foreigners to understand. For example, gift giving plays a powerful role.
Additionally, foreign businesses often underestimate the importance of growing a strong relationship with the government. The government can play a make-or-break role in businesses expanding into China, particularly with the recent tightening of import regulations in a bid to strengthen the power of local brands and minimise weakness in the local currency. Having an established relationship with the government can give you leverage when it comes to competing with other local and international brands.
Dynamic Business: Which state is leading the way as an exporter?
McGuire: South Australia. Last year, over one million Chinese tourists visited Australia, but with a country as vast and plentiful as ours, experiencing as much as possible in one go can be a real challenge. This is where South Australia found its niche, offering tourists 2,000 cellar doors, world class beaches, fresh seafood and desert nights all in the one place. Additionally, direct flights are now coming in daily to Adelaide from Hong Kong and Guangzhou.
The next step to truly leverage this tourist experience, however, is to be able to connect the tourists once back home with the goods they fall in love with in Australia. This is where Chinese payment methods like Union Pay and WeChat Pay come into play, allowing foreigners to continue purchasing South Australian goods from vendors who are signed up with the finance tools they are accustomed to using.
Dynamic Business: How can fintechs help SMEs export to China?
McGuire: Fintechs are essential in helping connect China with Australia. With the increase in cross-border financial flows, it’s important to have multiple connection points along the way for every transaction. We benefit from a CNY license inbound and outbound, and have expertise in both the Chinese and Australian market. As a start-up we are more nimble than larger, more established organisations and as a natively Chinese-Australian business we’re much less likely to face the pitfalls Chinese businesses face when expanding into Australia, and vice versa. Furthermore, we don’t just provide payments – we also provide information and education to help Australian and Chinese businesses work better together.