In recent years, China has been a dominant force in the global economy, serving not just as the world’s manufacturing hub (responsible for 30% of industrial output in 2021), but as an increasingly core market in itself. Events in China now reverberate throughout the world, from Covid to industrial policy, social trends and geopolitical trends. For businesses in the West, understanding China’s role in production, development, capital flows and supply chains is increasingly important to competing in today’s globalised world. 

To understand the rapidly changing role China now plays in the modern, global economy we sat down with Fabienne Pellegrin, Partner at LBB Asia Ltd. on our podcast Freight to the Point to discuss lockdowns, consumer demand and social shifts in this pivotal market.

Developing in a bubble

China’s approach to Covid-19 was unique and held far reaching consequences both within the country and without.

China primarily used lockdowns as their means to control the virus, with major impacts on the daily lives of citizens, not to mention the industrial sector, supply chains and the economy at large. However, seemingly from one day to the next, all of the COVID-19 measures were lifted. Though the journey out of ‘zero-Covid’ has been challenging, with operations severely impacted due to a high rate of illness, there is now much more optimism for the future both in the country and from the outside. 

One of the unexpected consequences of this policy of isolation has been new development within the economy itself. ‘China’s been living literally in a bubble for three years. And this has given an opportunity to many of the domestic brands, Chinese brands, to really prosper and bloom into the Chinese consumer market,’ explains Fabienne. 

With international brands and businesses severely limited in their ability to engage with the country, new products and trends have arisen that cater specifically to the domestic market based on deep local knowledge.

The Chinese brand shift

The boom in Chinese consumption has been a huge benefit for many global brands in the last two decades, but now homegrown competition is raising the bar. Many Chinese brands are specifically catered to the Chinese consumer, giving them a competitive edge, though the impact of this varies by market segment. 

While domestic innovation has made it increasingly difficult for foreign brands to compete in the mid-market, established luxury brands like Louis Vuitton and Chanel are insulated. This is partly due to their strong brands, with years of heritage, as well as robust budgets.

‘ [Catering to the China market] means having a China fit, looking at what the China use case scenarios are for your specific products, putting investment beyond just having a social media account in China with Chinese models.’ says Fabienne. ‘You really need to have a holistic China strategy to make it in China. And if you are not able to do that, then maybe that investment is better spent in different markets than in China.’

Key steps include:

• Understanding your product’s legitimacy in the Chinese market and identify what differentiates it from competitors
• Conducting thorough market research to understand the target audience, their preferences, and behaviour
• Moving quickly to establish market share before copycats emerge

A strategic approach to the Chinese market

While challenges exist, China remains an extremely valuable market for international brands. Currently, China’s urbanisation rates are 62%, with predictions that there will be 70 million more middle-class consumers in the next three years, creating potential for the market to grow significantly. 

For businesses entering the Chinese market, the right supply chain infrastructure  will be essential to creating the necessary specificity, speed and cost-control to compete in this valuable market. 

As discussed above, businesses require the ability to:

• Rapidly launch, test and adapt products for the Chinese market based on local data
• Share insights on demand and production on a global scale to integrate strategies across supply chains
• Manage suppliers at scale and ensure consistent service, cost management and performance
• Work at a level of control and quality that creates distinct, valuable products 

Zencargo is the global partner for agile supply chains, helping the world’s most ambitious businesses drive end-to-end value through their supply chain to optimise their approach to different markets, production processes and service levels.

Our central supply chain management platform and digital freight forwarding experts can help you make data-driven decisions that improve our performance, cost efficiency and working capital across your network. 

• By working from a central source of truth, supply chain leaders can manage manufacturing and logistics partner performance at scale based on accurate information to improve SLAs, lead times and cost management.
• Our landed cost tools help businesses understand the costs of sourcing and manufacturing in China, providing transparent pricing and clear cost breakdowns to help teams manage margin and revenue.
• With real time collaboration, businesses can synchronise all relevant stakeholders, from logistics to commercial, manufacturing to customs, to help make key decisions faster. Working together, businesses can improve time to market for new products to reduce delays, streamline processes, and ultimately, drive more successful entry in the Chinese market.

To find out how our world-leading digital freight forwarding services can help you drive more efficient, effective international expansion, get in touch with one of our experts.