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6 Reasons Why Australian SMEs Should Explore The Chinese Market

Everyone can see China’s massive growth in recent decades. Suggestions that the 21st century will be the Asian century are far more than just hyperbole. With a growth of more than 6% GDP each year, China is the best opportunity for development of any company.
While many assume that this marketplace will be dominated by multinational corporations, there is still room for small businesses to thrive. Prime Minister Malcolm Turnbul has committed to bringing more Australian small businesses to Chinese platforms , making this one of the best times to explore the Chinese market.

Here at Ausmate, we specialize in facilitating trade deals between Australian companies and Chinese distributors, mitigating some of the risk of this new venture. Here are 6 reasons why Chinese export would be an intelligent move:

1. High quality demand 
Australia has always had a good trade relationship with China. Our massive wealth of coal and iron ore has made us an invaluable resource. While that is not about to go anywhere, anytime soon, our lucky country offers more than just basic commodities. Luxury wares such as skin-care products or organic produce are a fast-growing market in China.
Chinese have an aspirational desire for the same creature comforts that we in the western world take for granted. More importantly for you, they are willing to pay for it.
Ken Howell, from the South West Institute of TAFE, concisely explained his take on Australia’s role in the Chinese marketplace. “Australia is never going to be the bread basket of Asia but it can be its delicatessen,” he says. “China is crying out to get access to clean, quality food.”

2. Positive Aussie Branding
Have you ever seen the ‘Made in Australia’ logo? Chinese have. That golden kangaroo represents stability and customer piece of mind. As we have mentioned before , Chinese faith in its own quality control is extraordinarily low. Australia’s, perhaps naïve, faith that anything being sold to us is safe to eat, just isn’t true for the majority of China’s populous and they are keenly aware of the dangers they face.
We have recently experienced some of these fears with the outbreak of hepatitis-A being linked to Chinese frozen berries. This is just a tiny example of the mistrust that Chinese foods have garnered.
The public image of Australian Made foodstuffs is one of clean, healthy and environmentally-friendly produce. More so than perhaps any other marketplace, having a quality product is a strong selling point in China.

3. Middle-class Boom 
There are more than 150 million Chinese citizens that classify as middle-class workers. Let’s try some math:
A. Look at your current, Australian customer-base.
B. Buy a calculator and multiply that number by 10.
C. Keep that number for a second. The Australian treasury projects that the middle-class population of China will increase to 670 million by 2021 .
D. Take that previous number and multiply it by a further 4. That is your potential customer-base. That is a big number.
The sheer amount of wealth being generated in China now, and in the future, is staggering. The surge in wealth per capita has allowed more people than ever to look at the consumerist lifestyle as attainable.

4. Free Trade Agreement
The China-Australia free trade agreement (CHAFTA) has been in place since late 2015. This agreement reduced the tariffs that came from importing and exporting goods to and from China. If you have been thinking of getting into the Chinese marketplace, you are no doubt aware of this agreement.

If not, we recommend you look at it here .

What you may not have known is that there was a further reduction of tariffs in January this year. In competitive marketplaces such as food and beverages, these reductions can have a massive impact on sales. This coupled with Australia’s geographic proximity gives us a competitive edge over many of China’s other trading partners.

5. Trade disagreements
It is not a well-hidden secret that America and China’s trading partnership is struggling. President Trump’s bombast has been attributed to increasing tariffs between the two superpowers. Areas like, industrial components, electrical equipment and food/beverages will all be affected by the escalation .
Regardless on your opinions on this, China still requires international trade, and Australia, for the many reasons outlined, is a perfect alternative candidate for increased trade. Beef imports, for example, are set to skyrocket, as our American counterparts contend with colossal 25% tariffs. Other western countries, like Europe, lack the ease of access and logistical efficiency that our country maintains.

6. Powerful E-commerce boom
While many of us use Amazon or Gumtree to buy luxury items, like electronics and apparel, E-commerce sites in China have permeated themselves throughout Chinese culture. Alibaba and JD.com are the two giants of the E-commerce industry and supply up to 99% of China (JD.com’s claim) with everything from luxury goods to basic, everyday necessities.
Unlike Australia, the Chinese populous is more open to buying a wide variety of items online, from fresh produce to toothpaste. Also unlike its western counterparts, who use multiple specialized retailers for each of their shopping needs, Chinese sites provide everything in a singular place.
While your products may have little to no online presence in Australia, there are still opportunities to be explored in a new, online marketplace.
During the largest selling day of 2017, Alibaba made 168 billion Yuan (about 34 billion Australian dollars).
This is not even close to China’s e-commerce potential. Only 30% of China has easy access to broadband, though that number is rising dramatically. Much like the Chinese middle-class boom, a rapid rise in internet access could dramatically increase your sales potential.

There is a window of opportunity for Australian businesses to become major players in the largest upcoming economy in the world. All we need are quality products and a strong connection to Chinese distribution. The product is on you. Ausmate deals with the rest.

By Lachlan Holt

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