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Opportunities and challenges in China’s B2B economy

February 21, 2021 |   Jasper Gill

The China B2B economy has witnessed significant growth in recent years and has been one of the most dynamic markets around the globe, providing lucrative opportunities for international businesses. In 2018, China took up nearly one third of the world’s B2B market and the share continued to grow. In 2019, the B2B transaction volume in China has reached 3.7 trillion USD with an annual growth rate of over 20%, according to iiMedia Research. It is predicted that by 2020, China will become the largest online B2B market in the world.

COVID-19 did pose a hindrance for China B2B economy in the first half of this year; however, the Chinese economy is showing early signs of recovery and the country seems ready to start their post-COVID chapter. In a recent McKinsey study about citizens’ confidence level in their country’s economic conditions, Chinese exhibited the highest optimism with nearly half of the population believing that the economy will bounce back within 2 or 3 months and grow even stronger.

In the first half of 2020, China became the EU’s biggest trading partner, surpassing the US. For instance, the transactions with China accounted for 27% of all cargo volume at Germany’s Port of Hamburg in 2019. The Port of Zeebrugge in Belgium realised a 14% increase in transaction volume during the pandemic, most of which had been driven by the trade activities with China.

Apart from ocean freight, the China-Europe Railway Express saw robust growth in the first quarter of 2020. In total, 1,941 trips were run by freight trains carrying 174,000 TEUs (twenty-foot equivalent units) of containers, increasing 15% and 18% year-on-year, respectively, stated by China State Railway Group. Overall, the development of transport infrastructures and trading partnerships facilitate the cross-border businesses greatly, laying solid foundation for B2B companies to tap into the China market.

Characteristics of Chinese B2B clients and channels

UPS’s Asia Pacific Procurement Intelligence Report 2019 reveals a few interesting facts about China’s B2B market. Compared to their Western counterparts, Chinese B2B organisations are larger size and men make up 69% of all decision-making positions. Another interesting fact is that Chinese decision-makers tend to be younger than their Western counterparts, with 41 being their average age.

Given their relatively young demographic, it’s probably no surprise that B2B buyers in China are internet savvy and rely heavily on online information to support their purchasing decisions. According to a 2018 Zhiyan Intelligence report, the spending on e-procurement for industrial goods has risen to 30% of the total expenses, compared to 24% in the US and 21% in Europe. According to UPS, the top criteria for Chinese clients was the quality of the commodity, followed by after sales support, dispatch time and maintenance services. Meanwhile, long shipping time, unavailability of real-time tracking and the inconvenience of returning goods were flagged as major concerns.

Despite the rising popularity of online procurement, the traditional offline channels remain indispensable in China. The majority of Chinese business buyers still place great importance on being able to reach a sales rep directly through phone calls or face-to-face meetings to establish a personal connection first before proceeding to the next step. For international companies looking to sell to businesses in China, it is therefore critical to integrate their on- and offline marketing channels to enable a positive customer experience that covers the entire decision-making journey.

Challenges in China B2B market

Despite the promising outlook of the China B2B market, challenges for foreign companies remain, especially against the backdrop of a global pandemic. At the time of writing, most international tradeshows and conferences in China were either cancelled or postponed, meaning the usual in-person ways of generating leads and strengthening relationships are not an option. Meanwhile, as diplomatic ties between China and some regions are getting frostier, cross-border businesses are facing increasing challenges and resistance, with local regulations for international trade changing frequently. For instance, recent updates to Tencent’s advertising rules are making it difficult for some sectors to run paid digital marketing campaigns.

During these times of turmoil, agility is key. B2B marketers need to start reimagining their strategies for acquiring leads in China. According to McKinsey, B2B buyers across the globe now value digital channels way more than more traditional modes when researching and reaching suppliers. A supplier’s website, online materials and information on mobile apps are cited as the 3 most effective self-serve interactions. Live chat was named the most popular channel for direct interaction with potential suppliers.

What is certain that in these times of uncertainties and limited global mobility, digital channels are going to be more important than ever to reach Chinese B2B buyer. If navigating the digital ecosystem in China is a key priority for you, you might be interested in our free guide on generating B2B leads online in China.

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