SERIES: Connecting Australia and China

Our ‘Connecting Australia and China’ series is back in 2017! So far we’ve looked at organisations that will help you do business with China, tips on Chinese business etiquette, legal know-how, big companies that tried and failed to conquer the Chinese market and the possible reasons behind their failures. Perhaps you noticed that the companies we mentioned mostly belonged to the services and technology industries; this is because foreign commodities actually sell extremely well in China and are often preferred over local brands by customers. Why is that?

Over the years, Chinese consumers have learnt not to trust local products, especially with regard to food. There have been several instances where local health authorities have discovered the hazardous nature of Chinese food products. Bean sprouts tainted with growth-boosting plant hormones, cooking oil with cancer-causing agents and milk powder tainted with melamine are some examples. One particular incident in 2008 concerning baby formula resulted in the death of six infants with over 300,000 others suffering from kidney damage. Public confidence in local products was badly shaken when the products were revealed to be fake, having not received endorsement from the government.

Australian products especially are considered ‘natural, healthy and authentic’ by Chinese consumers. Supplements, dairy, honey, food, skincare and cosmetics, maternity and baby products make up a large portion of Australia’s exports to China. China is Australia’s second-largest market for pharmaceuticals such as vitamins and health care products, valued at around $381 million in 2013-14. Past scandals involving local product have deeply damaged customers’ trust in local brands and so most Chinese consumers equate foreign brands to superior quality and safety.

This popularity of foreign products in China has resulted in the formation of communities like the daigou who buy Australian goods on the behalf of customers in China and ship them the products. Daigou use channels like WeChat to get in touch with consumers in China and set up deals. Although no exact number has been pinpointed, an estimate has said that there are nearly 40,000 daigous in Australia advertising on WeChat or C2C e-marketplaces in China. A majority of the businesses in Australia realise the huge market available to their goods in China, and most of them make the most of that knowledge.

Have you considered how your business could make use of China’s demand for foreign products?