VietNamNet Bridge - Vietnamese businesses can penetrate the Chinese market and reap success if they know how to take appropriate steps, or else they will lose out.
 A measurement equipment manufacturer in HCM City has seen its China-based plant make a profit in the first five months of this year, after nearly 10 years spent surveying that market with “silent footsteps.”

It was a hard journey, the company’s deputy general director says. According to this leader, the company studied the Chinese market through a “slow but steady” strategy. They displayed products at a trade fair and sold products on a pilot basis. He himself had to bring products to retail markets to donate to traders, and consigned products to agents that sold similar Chinese items. After a long time, local consumers as well as agents and Vietnamese traders in the border area finally accepted his products.

However, the agents expressed concern about the possible confiscation of the products of which standards and quality had not yet been registered. The company’s deputy general director had to bring the product to Beijing to register it. The 35% import duty coupled with 10 yuan paid for every product approved only enabled the company to earn a modest profit, even though this product had been widely sold in China.

To penetrate the market, the company decided to build a factory in China. They had to prepare many kinds of papers such as the quality inspection certificate, which had to be issued by the administration of Guangxi Province where the factory would be based. The project, with an investment of US$4.2 million and a designed capacity of 200,000 products per year, was finally approved.

When the company launched their made-in-China products, people doubted that they were counterfeits and looked for the Vietnamese-made product. The producer had to release leaflets to explain and recommend test-using the product and had to donate products to agents again. Things went smoothly after nearly four weeks, when agents agreed to sell the product.

Now, fake items had appeared and were even sold at shops next to the company’s official agent. The company filed suits, but finally accepted the situation as counterfeits came from too many sources.

Opportunities

Vietnamese businesses have so far been urged to exploit the Chinese market where agro-products, fisheries products and consumer goods from Vietnam have gained a firm foothold.

Opportunities for businesses come when consumers with increasing incomes tend to use quality products. Chinese cannot make all products that can compete with Vietnamese goods. Not all goods made in China are characterized by low prices and poor quality; in reality, Chinese-made quality products have very high prices. “A similar product has only 80% of the quality of a Vietnamese product but costs 1.5 or twice as much,” says a tradesman.

A company that exports 60% of its agro-products to China says that the time is now for Vietnamese businesses, while “the Chinese Government still loosens policies to concentrate on technologies, manufacturing, production and trading.”

Seeing Chinese merchants come to Vietnam to buy fisheries materials, the owner of a seafood company in HCM City’s Binh Tan District decided to leave for China to seek clients and deal directly with them for a higher profit. He now exports seafood and agro-products to gradually set up a system of partners and get a foothold in the market. In return, he is looking for partners to import electronics and telecom products from them.

Still, investing in China requires vigilance and prudence. The owner of a handicraft company says a Chinese trader had recently come to his company to place an order worth US$300,000, but he has not yet accepted it because he is aiming at the Beijing and Shanghai markets, while this trader comes from another province. He has not sold the products as he has to find ways to “sell for the best price and for a long time.”

There are potential risks for investing in China because “their policies change continuously.” Their commitments to investment incentives may never materialize.

A company representative says he received an investment certificate with the commitment to corporate income tax exemptions for the first three years, but discovered that the time of the commitment was also the time the policy expired. At present, this tax rate has been sent down from 37% to 25%, applicable for both local and foreign businesses. At industrial zones in China, the investment certificate is granted in accord with the progress of project disbursement, not to be granted once when registering the legal capital.
 
Source: SGT