Foreign Startups in China: How to win the Chinese market?

Although China is still closed to foreigners and doesn’t look like the easiest place to introduce foreign business into, the time to think about putting your start-up out there and looking for Chinese investors might just be the best now.

As the Chinese government is making it hard for wealthy people to send money abroad and invest elsewhere, Chinese companies and wealthy investors are looking at foreign investments in 2022-2023. In this blog post, we will take a look at how to succeed with your startup in China or attract Chinese investors to your idea.

Chinese startups ecosystem

China’s startup ecosystem is one of the most friendly, as there are many governmental programs for domestic and foreign entrepreneurs, especially when it comes to innovation and new technologies. 

National People’s Congress in China aims for technological progress as one of the main goals for the upcoming years. China invites all tech startups and many wealthy investors in the local market are fighting for the best startups so that they can grow them into million-dollar-worth companies. 

To achieve those goals, China needs engineers and data scientists with advanced technological skills but also founders of startups, that have strong leadership skills and ideas that can turn into new innovations. with a $93 billion investment in the venture capital market, it’s expected that China will soon become the world’s largest startup ecosystem. 

What is more, many wealthy Chinese are looking abroad, as China became a ‘risky’ and ‘unfriendly’ environment for them, with the zero-covid policy not seeing any improvement and the real estate crisis, which created an unstable investment circle in the country. 

Foreign startups chase « Chinese dream »

In 2015 in Shanghai, Thornhill, Erickson, and McNew, three U.S expats founded baopals.com, a website that helps English speakers to use Taobao and Tmall, two platforms of China’s e-commerce giant Alibaba. 

They realized that shopping on Taobao (China’s leading e-commerce platform) is quite difficult for most foreigners in China while the platform is one of China’s marvels. It is a daily convenience for Chinese natives which allows purchasing a large range of products. 

Erickson, a former English teacher in China shared “when I needed or wanted to buy something on Taobao, I always told my students or colleagues to help me purchase”.

The trio soon realized the potential market demand and started their e-commerce business, becoming start-up founders. They divided their work into 3 ways: Thornhill took the responsibilities of product, Erickson was in charge of the business development, and McNew the tech development.

Baopals.com was officially launched on march 1^st, 2016 and after being featured in expat magazine, the company began to grow at a steady pace. After 18 months, baopals.com has sold more than 640,000 products and the team has grown to 30 employees, moving from an 80-square-meter apartment to a bigger office space.

Why are startups coming to China?

As Erickson said, “once you come here, it’s hard to leave”. China is offering a lot of advantages and opportunities for foreign brands but also brings a unique experience for young (or less young) foreign entrepreneurs and start-ups.

Chinese will become wealthier and increase in number

The development of society will lead Chinese consumers to seek a better way of life. As a result, more and more high-end products such as premium chocolate, original coffee shop, and luxury fashion are gaining ground in China.

The increase in the average income level and the middle class in China support this demand and consumption in the country, bringing unstoppable growth. Chinese cities are thriving. Shanghai, a very cosmopolitan city is a great source of innovation and start-ups in the home market, as many industries carry on their operations there. But so is Beijing, Chongqing or Guangzhou, and Shenzhen, a huge technology capital of China. 

Chinese people love foreign products

Nowadays, Chinese customers are more and more attracted to foreign products and really often they chose foreign items over local ones, believing they have better quality. Indeed, after many scandals in China, Consumers worry about products, especially when it comes to food, cosmetics, and luxury goods. 

Millennials and Gen Z, especially from big cities like Shanghai, Beijing, and Hong Kong help the economy grow, as they learn from the West, gaining western shopping culture and lifestyle. They spend a lot on themselves, purchasing imported alcohol, luxury clothes, and cosmetics from Europe or Japan, signing up for gym memberships, and sending their kids to international schools. 

Here is a survey on foreign food brands among Chinese people, showing that they trust foreign brands far more than local ones:

Today after more than a decade of expanding Western influences in China in terms of products and shopping behaviors, the Chinese government is promoting a Guochao trend, which is a trend of choosing local brands over foreign companies. Even though the trend is growing, is not a threat to foreign start-ups, as a big part of Chinese consumers still considers foreign products and businesses better than Chinese ones. 

Low labor costs and helpful taxation policies

Even if China is no longer the workshop of the world, labor costs remain lower here than in many other countries. Also, the country is supporting foreign companies to settle in the Chinese market, especially in second and third-tier cities, which need to be developed and need solutions in terms of technology and innovation.

In recent years, China has been pursuing a mixed-ownership reform of SOEs (state-owned enterprises) and Xiao Yaqing, Head of SASAC said “we welcome foreign companies, including US-funded ones, to participate in China’s mixed-ownership reform. […] We also hope US enterprises have a complete and objective knowledge of China, and open more to China”.

How to attract Chinese companies and investors to your startup

The way to attract foreign investors, especially Chinese is digital. Overseas entrepreneurs must work hard to adapt to the Internet environment in China. You need to put yourself out there if you want to attract their attention and find a local partner for your startup. How to do it? Here are some tips;

Promote your idea via the Chinese website

Just like we check everything on Google, Chinese people use Baidu to look for information online. If you want to attract attention in China, it’s best to start with a Chinese website hosted in Mainland China. The majority of Chinese netizens aren’t fluent in English and they will definitely take a look at your project if you present it to them in their mother tongue. 

Remember about adding a contact form and some chat to your website, as Chinese people are used to fast responses. 

Focus on Baidu to build your branding and become visible in China

Baidu is the biggest search engine in China but what is important to know, is that Baidu is not only a search engine. In fact, it’s a whole ecosystem of platforms and websites, just like Google. Having a Chinese website hosted in China puts your chances higher in Baidu SEO, as Baidu favors websites in Chinese over foreign ones, putting them higher in the search results.

In addition, apart from investing time and resources in the website, you can also help your SEO results by starting accounts on different forums and Q&A platforms so that you will appear in search results. It’s also great to build good e-reputation and learn about the interests and demands of your audience. Try Baidu Tieba or Baidu Zhidao to meet the community. 

Put yourself out there on social media

If you want to get to Chinese people, you can be sure that they are all on WeChat and other social media platforms in China. WeChat has 1.26 billion active monthly users in 2022 and it’s the main source of information. 

Wechat is the best way to contact your prospects. You can start an official account, where you will put all the main announcements. You can later link this account to a mini-program. If your start-up is about technology and innovation. it’s good to show it there as an example of your product or idea. 

Many investors also use Weibo, as they read blogs and look for information there. It’s a good platform for lead generation because you will be able to reach people out of your followers’ group. 

Need help with finding a local partner in China?

Our Agency is specialized in digital marketing in China. Our services include e-commerce solutions in China, advertising, and SEO strategies. We can help you implement your activity in China, through platforms such as Tmall, JD.com for e-commerce, Little Red Book, and Wechat for your branding.

We can help you find a local partner, or advise for joint ventures for start-ups in China and Southeast Asia (many Chinese investors now move to Singapore, Malaysia, and elsewhere). 

You don’t need to move to Silicon Valley to find investors for your idea. Try the Chinese market instead! Startups in China are widely accepted and you can learn a lot in this market. 

Don’t hesitate to leave us a comment or contact us for a free consultation! 

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