China is a place of paradoxes, and opportunities – but only for business people who take the time to learn about the country’s diverse culture.
That’s the message from Dr. Richard Kwor, a professor at the University of Colorado at Colorado Springs and the keynote speaker for the annual Mayor’s International Luncheon on May 16 at the Broadmoor Hotel’s Colorado Hall.
Kwor, who was born in China and graduated from high school in Hong Kong, has been in Colorado Springs for 19 years. He has traveled throughout China, and said that the country is an excellent place for business opportunities.
“China can be a hard market to break into,” he said. “But there are ways to do it. The government is welcoming American investments into Chinese companies, for example. The information is out there, but people have to do the research – learn about the country and what it’s like.”
China can be a difficult place to understand, Kwor said. The country is developed and modern along the eastern seaboard, where cities such as Shanghai and Beijing boast skyscrapers and populations in the millions. But the western part of the country is littered with undeveloped villages.
Because China has such a varied population, it’s a market waiting to be tapped, Kwor said. The Gross Domestic Product grows more than 9.5 percent each year – and has for the past two decades. He said his presentation will cover the difference in income between Chinese and Americans, as well as the differences in spending habits.
Companies that invest in China, and build plants there, could easily dominate the market.
“For instance, Coca-Cola started in China very early,” he said. “And now, that’s all you can find there. You can’t find a Chinese equivalent. And that’s because they have their own plant in China.”
Kwor also plans to address outsourcing. While companies can build their own factories in China, or merely hire a Chinese company to make goods, he said very little of the money stays in China. Ninety percent of the money made from products made in China ends up in the United States.
“About 30 percent is profit for the brand,” he said. “And 60 percent goes to sales and marketing. That only leaves 10 percent in the hands of the Chinese. So, even though goods are made there, the profit from those goods is here in the United States.”
Chinese people make much less money than Americans, and the cost of goods in China is similar to the United States, Kwor said. Despite lower incomes, however, the Chinese people are willing to spend hundreds of yuan for luxury items.
“The average Chinese person makes 2,000 yuan (a year, after expenses),” Kwor said. “But they will spend 2,000 yuan for a cell phone – and cell phone use is really picking up there. They just spend differently than in the U.S. They target their purchases, save their money until they can buy what they want.”
Chinese determine annual income by “disposable income” money left over after normal expenses of food and shelter were paid, Kwor said.
Kwor said he was asked to speak at the annual mayoral event because he knows Colorado Springs and China. The Chinese market is one that can be difficult to understand, he said, but for some industries it could be worth the effort.
“Home construction is a big area,” he said. “Automobile sales are another. Beauty products are an incredible business in China. They did a study of an area in China with 20 million people. They estimated that their per capita earnings – after they paid all their expenses – equaled about 10,000 yuan. Multiplied by the number of people, that comes to 20 billion yuan, or $20 million U.S. dollars. That’s a lot of money out there, a lot of money that will be spent.”
His advice for business people seeking to tap into China’s burgeoning market: do your homework.
“You need to pay attention to the culture,” Kwor said. “You need to develop local contacts, take advantage of local government and their incentives to get companies to invest in their region. You need to tap into existing channels.”