How to Succeed in China: Lessons from the Valley

Vanessa is currently based in Beijing, managing international business development for Innovation Works’ XingCloud. She is also Vice-President of Young Entrepreneurs Association of NUS (YEAN) and loves new ideas, tech and travel. You can follow her on Twitter or read her blog.

Success in China? Gold medalist Liu Xiang of China, at Athens 2004. Credit: bestpicturesof.com

Over the weekend, I attended the inaugural discussion by Ideas for Singapore where fellow Singaporeans, many whom are in the ICT sector, discussed and shared some opinions based on their experience and observations in China.

The topic that was discussed is one issue that most Singaporean (and international) entrepreneurs planning to enter the Chinese market are concerned about: How tech start-ups can successfully enter and survive in the China market, especially when US giants such as eBay, Google, and Groupon have failed miserably.

So why did the US giants fail?

There are three possible reasons.

1. Tilted playing field

There are countless types of licenses and self-censorships requirements in China, particularly for foreign companies. As we are well aware, social media and self-censorship do not come hand in hand. That means in order to survive in the Chinese market; startups need to play by China’s rules. It is understood that many internet companies have sizeable teams to do editing to make sure the things that they publish are censored and suitable for Chinese consumption according to local law.

2. Many tend to trivialize Copy to China (C2C)

Almost all Chinese internet companies start by copying business ideas or models from the US, but the similarities typically end here. To succeed in the China market, these local Chinese clones are relentless in pushing new businesses and operation innovations. They are constantly seeking to localize and cater to their own markets, which most international companies fail to do. For example, SinaWeibo, a supposed Twitter-clone, has incorporated the SNS features of Facebook.

In addition, local clones are extremely nimble and more cost efficient as compared to international giants. Often due to obligations to shareholders and brand integrity, or because of internal processes, these international giants take a longer time to react. In order to maintain their standards and brand, they tend to employ resources which are of higher costs than their clones, inevitably driving up their overhead costs.

Most of these international companies may not really understand the Chinese market, and tend to forget that China is not simply one market. After visiting different cities within China and having lived in Beijing for more than six months, I realized that different cities have different cultures, practices, habits, and purchasing power.

Often international companies think they must always target first tier cities. However they fail to realize that the citizens in these tier one cities are spoilt for choices, and the landscapes in these areas are too overcrowded and saturated. These companies could look beyond Beijing and Shanghai, perhaps targeting tier two and tier three cities where the local government might lend more support.

In fact, China’s mobile internet users are classified into two distinct categories – 20 percent high-income white-collar city dwellers and 80 percent low-income, low-educated, low-spending users comprised mainly of students, farmers, and migrant workers. So international companies could consider the market opportunities presented by the latter user group.