Small Business: Making it in China

Margaret Fong, deputy executive director of th Hong Kong Trade Development Council. Photo / supplied.

Margaret Fong, Deputy Executive Director of the Hong Kong Trade Development Council (HKTDC) talks to Gill South about doing business in Hong Kong and China.

She is part of a delegation of 15 senior executives from Hong Kong food and wine importers and logistics companies to visit Auckland this week, (24-28 September). They are looking to source food and wine products and build logistics partnerships.

The markets in China

Mainland China is developing quickly. There are many cities that everybody knows about, Shanghai and Beijing, for instance but then there are the second tier cities like Nanjing, Tianjin and Ningbo. The first tier cities are very international and many of the international brands would already be there. We are thinking of second and third tier cities that have had less exposure to outside brands. They are very eager to have brands of quality and are very keen to have the outside exposure that they have not had previously.

The demand

We do surveys on mainland China, and one of the first things that we see a demand for is quality imported food. New Zealand seafood is very popular with all Asians and Hong Kong and mainland China, especially. Products like milk powder, baby food, anything baby-related are also in demand. These are the sorts of things that people are willing to pay for.

Mainland Chinese are also interested in health supplements from New Zealand, Omega-3, health food also organic skin care. One thing still not very popular in mainland China is dairy products such as cheese and milk among adults. Baby milk powder, formula, is different. On the other hand ice cream is very popular though the market is still very new.

The retail scene

In Hong Kong we have a gourmet supermarket and retail chain, City'super. Everything in these supermarkets is imported from overseas. This chain will be expanding to the mainland, they will open in cities like Shanghai. Mainland China consumers know about City'super so that when it opens on the mainland it is a brand name already, known for its upmarket food products. The stores have a lifestyle section too with home products.

Hong Kong as a test market for SMEs to mainland China.

Hong Kong could be regarded as a test market for NZ SMEs. In Hong Kong, we are a trend-setter for the mainland Chinese. In a recent survey, we found that 87 per cent of Chinese consumers look to Hong Kong for trends, not just in what we are eating and drinking but what we do.

Out of 42 million tourists in a year, 28 million are mainland Chinese. They go to our shops, to our restaurants and see what is popular. Some mainland Chinese can watch our TV and get our radio stations. They keep in close touch with Hong Kong and look for references on what is popular.

At this particular point, everything the mainland Chinese want is based around what they can consume or what they can wear - fashion, for instance, those things that they don't have. I think for Hong Kong, NZ is mostly known for food, wine, healthfood supplements, health food products and hence the same applies to mainland China.

Hong Kong as a hub for NZ SMEs

What we recommend is for NZ SMEs to work with Hong Kong companies to enter mainland China. From Hong Kong they are so much closer, the Hong Kong companies can go and check things out for you on the mainland. They may already have the distribution and retail networks you need in mainland China so they will immediately get your products out instead of you having to develop your own distribution channels. The US, Japan, the UK and Taiwan all use Hong Kong as the gateway for mainland China. These countries use Hong Kong for its financial services and logistics and as the hub to source, market and then get into the mainland.

At the Hong Kong Trade Development Council - what we do is matching. If there is something you want to sell or buy or you are trying to provide a service, we have got a number of companies we can recommend who meet your requirements.

Trade Fairs

Come to our fairs, the council has 35 fairs a year. They are always international in terms of distributors and buyers. The Hong Kong Food Expo is the biggest event in August every year with 16,600 buyers at the show. There is also a public hall where you can test your products. Last year 390,000 people came to our show, some from mainland China. We do promotions in Chinese cities before the event. A lot of companies launch new products during our fair.

We have a separate wine show called the International Wine and Spirits Fair in November every year, which we would recommend highly to NZ wineries. Last year we had 960 exhibitors and about 20,000 trade buyers. Chinese generally like red wines, because of the French bordeaux history but they do like NZ sauvignon. The consumption of wine is growing in China. It's a huge population. Even if you can have a small proportion of the total, already the potential is huge.

In Hong Kong, only $11 million of wine came from NZ in the last year compared with the total imported wine of $1.3 billion. There are huge opportunities awaiting NZ.

Go to HKTDC Research, for research on breaking into mainland Chinese consumer markets identifying 30 cities.

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