China is one of the key areas of growth for UK tech companies, and an essential step towards global influence and recognition for many organisations. The UK and China have been collaborating on science and technology innovation for over 40 years, with trade links now exceeding £70bn. However, due to its scale, vastly different business practices and legal system, and a number of ethical concerns, the Chinese market can also be very challenging to navigate.
With that in mind, the UK’s leading technology trade association, techUK, has developed the UK-China Tech Forum, a forum specifically designed to guide businesses through their entry into the Chinese market, in conjunction with the CBBC (China Britain Business Council). “What we're looking at in this forum is: How do we understand the opportunities for UK companies trading with China? And how do we address any of the barriers that are presented when companies trade in China?” explains techUK CEO, Julian David.
Collaboration opportunities between the UK and China
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As the tech sector in China evolves and grows, many areas of focus are technologies the UK excels in, offering great opportunity for British tech companies.
Edtech is a big area of collaboration between the UK and China, David explains. “This is something that the UK is a leader in. You've seen in the conventional university and academic sector Chinese students making up a huge part of the overseas students contingent, a big part of the UK academic scene. And the opportunity to do that online, to do that through Edtech, is huge.”
There is also great opportunity in health tech, fintech, smart cities, the internet of things, big data and AI. “They [China] are recognised as a big data and AI leader, and the UK has great capabilities there,” David explains. “I've talked to companies on visits to China and they're talking about AI all the way up the supply chain, all the way through markets as they digitise, and that again echoes what we're doing here. Clearly, in the use of these technologies, it is important we retain the trust of users.” Indeed, the big challenge for UK companies making the most of the opportunities in these areas is ensuring they’re also aware of and addressing the ethical and legal concerns of the Chinese tech market, particularly around surveillance and data use and security.
Scale is another key factor that makes the Chinese market so attractive to British businesses with expertise in the right areas. “It's important to understand just how significant the Chinese market is, with a population exceeding 1.4 billion people and a huge landmass,” David says. “So the opportunity that China represents as the world's second largest economy, with over 100 cities of more than a million people, and also with a changing and fast growing business and consumer market, is really significant for the UK tech industry.”
And for a UK tech company to truly succeed they must have global ambition. David explains: “There are no local tech solutions. The tech industry is global. And yes, there are local successes, but they must grow and they must be globally oriented, or at some point, they will be either a dead end or irrelevant. The tech industry is littered with examples of that – where somebody is trying to do a local or national solution and they've just been outpaced and out-innovated, and then out-marketed and outsold by a global leader.”
Addressing the key challenges of the Chinese market
The Chinese market presents a number of challenges for UK tech companies. As with any international business, companies must be aware of the legal, commercial and cultural differences between countries, and entry into the Chinese market also brings with it a number of ethical concerns such as data privacy.
David points to many differences between China and other international markets which UK tech companies must be mindful of. “Relationships take a longer time to build, and you need to understand the cultural differences and respect them.” He also highlights the complexities of the Chinese legal system, adding: “Local regulations and laws are very important in China. And, therefore, you really need to understand that they can significantly impact the timelines and costs of market entry and expansion. It's very well known that IP protection issues are significant, I think you can't underestimate that ... it's also true that they have different data protection laws.” Companies must be sure to stay up to date with new laws, particularly the 2017 Chinese Cyber Security Law which governs cybersecurity and data in China.
“I would suggest that businesses try to avoid some of the common mistakes,” says David. “So the first thing is lack of proper planning. You really have to plan how you're going to enter the market and you need to be prepared before you do it. You need to do a lot of due diligence before, for example, you enter into any type of agreement. Agreements can be hugely valuable for partners to help get into the market, but equally, if you get the wrong sort of agreement, they can be a barrier.”
For small businesses, in particular, navigating these issues can be risky and off-putting. It can be difficult for them to know who exactly to approach about what. Who's the expert in intellectual property? Who's the expert in digital trade? Who's the expert in tariffs? Having a network of companies and experts with experience in the right area can make all the difference. David explains, “that's why organisations like us exist, and that's why we're trying to provide those kinds of expertise. And what I would say to anybody is, if we don't know the answer, we almost certainly know somebody who does know the answer. And we'll get you the answer.”
UK organisations need to understand the entire process of entering the Chinese market from start to finish, as well as how to deal with the complexities arising from topical events such as the recent unrest in Hong Kong or coronavirus. It’s crucial, then, for UK businesses to support and learn from each other. “The forum that we've set up with the support of the British Government and with the connections with the Chinese embassy and Chinese organisations in Greater China brings together members on a regular basis to discuss issues and events, and to work with overseas partners to understand: Where are the opportunities? What can we do?” Another useful resource for companies looking for advice is the UK Government microsite, which provides guidance on setting up in China and includes case studies of UK tech companies who have made their business ventures a success.
The size of the market and regional differences across China bring as much complexity as opportunity for British businesses. David explains: “It's a difficult market – you shouldn't play down the challenges of addressing such a big market, and it's quite a varied market as well, it's not uniform. If you go from one part of China to another, you'll see very, very different rates of digitisation, of consumer growth, of even income patterns and education, and lifestyle and culture. So there are a lot of things to consider.”
Essentially this means that companies shouldn’t get ahead of themselves and try to tackle everything at once. Instead, they should focus on building business and relationships in particular key regions. “Our recommendation is where you have a very strong niche capability that you've built up in the UK and complementary markets, go and find the places where that's happening. It will be happening in China. And there will be companies that are leading there, and there will be city authorities and other authorities that are looking for solutions. So go there with specific offerings.”
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The impact of digital transformation
Alongside leaps and bounds in technology, the last few years have seen a huge shift in ways of working. Cloud computing and advanced video conferencing now mean businesses can keep down their business costs (and carbon footprint) by reducing international travel, and employees can work from anywhere in the country – a transition fuelled further by the events of 2020.
With people now not even having to meet in order to start an international business relationship, David believes organisations such as techUK are about to get a lot busier. “I think what it will push you towards is using platforms more and organisations like us and CBBC more. So, if you think about the opportunity that platforms bring, which is that it allows you to be in a network of people that are interested in something – whether that's a forum of relationships, on the parallel of LinkedIn and things like that, or whether it's a commerce platform ... we think that could be a breakthrough in terms of establishing business relationships more quickly, and without the expense of setting up in the particular country.”
Taking your business to China is an exciting but complex undertaking. If you ensure you have a detailed plan and are seeking the right advice from trade bodies and the government, you can give your business the best possible start in China.
Learn more about doing business in China at china.theweek.co.uk. For further information visit techUK and CBBC.org.
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