Market Research in China

1. Introduction to the conduct of Market Research in China.

a. Overview of China’s transition economy

Understanding of the Chinese historical past, state governance, and way of life are seen as indispensable parts of making investments to flourish in China’s urban areas and in the countryside. Deng Xiaoping assumed power in 1978 and managed to introduce political and economic transformations paving the way to a more equitable economic model for China. This shift acknowledges the gentle introduction of market economy from the overall command economy under the realm of Mao Zedong. China’s economic structure and political subdivisions are taking a shift and transitioning itself from what was then a configuration of a centrally planned backbone. Deng Xiaoping advocated on trade liberalization and flexible political governance to resist the economic setbacks brought about by the ill effects of the totalitarianism embraced during the time of Mao Zedong. The Township and Village Enterprises (TVEs), opening up policy, and the dual track pricing system initiated in the 1980’s have become flourishing economic watersheds responsible for aligning China’s loosening statehood. To rationalize the attraction of international trade and foreign direct investments, Economic and Technological Development Zones (ETDZs) were also established along coastal cities and internal regions.  Added to by China’s accession to the World Trade Organization (WTO) in 2001, the country submitted to international trade and liberalization policies that all WTO members share. This has been instrumental to pushing China from a global challenger to a global leader in commerce and trade.

As part of China’s opening up policy, a request for accession to the WTO was made in 1995. About six years after, in 2001, China’s WTO membership was officially announced. In year 2012 report by the WTO following China’s tenth year of accession to the organization, WTO announced China’s accomplishments as: the second largest economy of the world in reference to GDP indicators, the world’s largest exporter of merchandize, second largest importer of merchandize, the fourth largest exporter of commercial services, the third largest importer of commercial services, the first destination among all developing countries for inward FDI flows, and the first investor among all the developing countries for outbound FDI flows. Consequently, China today has turned into a global economic powerhouse and is continuing to paddle the gear for economic development and sustainability.

b. Influx of MNEs’ offshoring strategy to China

China’s explosive economic performance over the last two decades continues to attract investment initiatives for both export and FDI flows. Many foreign firms offshore their production operations in China to benefit from low-cost of local labor, availability of local skills, and large reserves of raw materials for manufacturing. These advantages allow multinational firms to achieve economies of scale and effectively compete with global participants in business. Over the past years, China has become an attractive investment destination for existing and new entrants to the global market. This has resulted to a rising demand of Market Research in China to determine the country’s market potential and credibility as an investment destination.

c. The Need for Market Research in China

Potential investors and companies currently operating in China are concerned with the security of their capital and the rates of equity return should they decide to pour their resources to China. Certain basic market potential indicators can be viewed through an analysis of current GDP growth rates of China in relation to past periods to see the level of risk involved and the potential that the Chinese market has to offer. An ambiance of trust will be built once consistent economic performance is documented and assessed. Stable GDP translates to credible economic and political infrastructures with reduced unemployment rates and favorable local income distribution. Given the degree of China’s attractiveness as an investment destination, prospective investors and companies currently operating in China are concerned with the specific details like what business models to use and what appropriate marketing mix variables to employ in order to ensure an attractive return of capital. As a response, Market Research in China involves the evaluation and identification of China’s market potential and the eventual review of trade and investment barriers to complement with the final decision to pour investment portfolios to the country. Added importance includes the understanding of culture and Chinese way of life, political structures, and regional attractiveness. By conducting Market Research in China, relevant insights will provide strategic advantages to be used in order to achieve targeted goals and objectives.

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