The government decision to accept Huawei’s 5G network technology, and the hosting of economic talks with China in June combines with Chancellor Philip Hammond’s endorsement of the Chinese Belt and Road programme to mark a seismic change in the likely future of UK trade relations.
Despite sustained White House pressure to reject Huawei technology and the Belt and Road project, the UK has turned towards China in what is almost certainly a precursor to the aim of creating a post Brexit trade deal, says Domenica Di Lieto, CEO of Chinese marketing consultancy, Emerging Communications.
From a Chinese perspective, it sees its attempts to become a global trading nation and supplier of technology services increasingly rebuffed, and the already popular proposition of a trade agreement with the UK is becoming even more attractive.
The Background
The United States, Canada, Australia and New Zealand all have restricted trade with China for different reasons, and the EU, led by France and Germany, is talking about putting up new trade barriers. Of the G7 nations, only Italy has signed up to China’s strategic Belt and Road global trade infrastructure initiative, with most other large economies remaining aloof at best.
In this scenario the UK presents one of the few positives for China’s wish to become a global trader.
The result of the EU referendum has been hugely popular with the Chinese people and businesses given the possibility of a trade agreement that would be the only one with a major Western economy. Such a deal would bring major benefits to UK companies in a significant variety of ways.
Firstly and most obviously, tariff free exporting would provide the advantage being able to lower sales prices and in doing so undercut international rivals in China. This will not be lost on Chinese buyers that have an ingrained passion for a bargain no matter what the figure written on the price tag. Alternatively, the removal of tariffs can be used to take more profit.
A trade deal would also open up previously restricted infrastructure project tendering that will still be denied to companies from other countries.
But there are other benefits UK companies already have in China, but which are largely under exploited. Chinese consumers have a deep distrust of the majority of domestically made products.
This has been heightened in recent months by a government campaign to improve manufacturing quality levels by publicly highlighting product faults across a broad swathe of goods and processed foods. The criticism is intended to prompt action to rectify problems, but has so far mainly served to further undermine confidence in domestic output.
In China, the UK has a robust reputation for reliable and trustworthy manufacturing. Clarks Shoes is a case in point. It has positioned itself as the maker of good quality mid-priced footwear, and called itself Clarks English. Its popularity and sales go from strength to strength.
There is also a deep-rooted interest in British history, heritage and culture that extends to a massive following for a wide variety of TV programmes ranging from Dr Who and Sherlock to Downton Abbey. English Premiership football is the most popular sports format in China, and many UK brands have an almost equal following. In addition, the UK is now the most popular destination for international study by Chinese students.
The considerable pro UK factors combine with another important consideration. Chinese consumers are strongly nationalistic in their buying decisions, and are reacting to geopolitical events in their selection of imported products ranging from food and drink, to cars and luxury goods. Given the feeling towards the US and a growing list of other nations this gives British companies even more advantage.
China also considers the UK a good location for investment, showcasing global brand value, and a place to make acquisitions that do not come under the same degree of scrutiny as in the US or mainland Europe. China also has a desire to be positioned as a global free trading nation, and sees the UK as endorsing this position as typified by former Chancellor George Osborne, signing up to the Asia Infrastructure Investment Bank.
But there is a problem for UK companies in this scenario. Compared to international rivals they have a very poor track record of being able to market themselves in China. Flagship British companies ranging from Tesco, M&S, ASOS, Top Shop, to Pret A Mange arrive with fanfare in China only to fail shortly after with their optimism and investment in tatters.
Yet there are huge possibilities to do business in China for big and small companies alike. So what is the UK problem with selling in China?
The reasons are simple, explains Di Lieto. Companies do not bother to fully understand Chinese markets and buyers, and marketing is done on the cheap and badly. These are unheard of practices when it comes to domestic and other markets where buyers and prospects are thoroughly understood, closely monitored, and marketing to them is constantly fine-tuned.
Tesco’s business plan for China was based on what worked in the UK. Its strategy was doing things the ‘Tesco way’. The problem was the Chinese do things the Chinese way.
People and business buyers in China are just as sophisticated as anywhere else in the world, and their assessment of marketing propositions just as enquiring of its consideration. They instantly identify lack of understanding or commitment when they see it, and they see it a lot from UK companies.
A major initiative to help solve the lack of understanding of buying audiences and marketing is the creation of the ‘Marketing To China Conference’, that has been established to expand commercial opportunities with China. It takes place on 5 and 6 of June in Central London, with experts from all over the World coming together to educate on how to maximise revenue opportunities by identifying consumer targets, and creating the most effective marketing.
