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Pros and Cons of the Free Trade Agreement with China

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It’s no secret that the Australia-China Free Trade Agreement will affect many Australian businesses, but how it affects your business is entirely up to you.

What is the China-Australia Free Trade Agreement?

In simple terms, the China-Australia Free Trade Agreement (ChAFTA) is a treaty that makes trade between Australia and China an easier process to undertake. It means that local businesses in both countries have a golden opportunity to tap into a new market without the common barriers to international commerce. These trade barriers include tariffs on imported goods and restrictions on investment. Considering that China accounts for almost a third of Australia’s goods and services exports, Australian business owners should brush up on their knowledge in this category.

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Why digital businesses should consider the Chinese market

The Chinese market has been enjoying a boom as an ever-increasing percentage of the population comes online and joins the world of digital business. It’s expected that by 2016, 70% of China’s 1.4 billion inhabitants will shop online more than once a week. Doing business in China was probably the last thing you expected to be considering when you first started your digital company in Australia. Even without the trade barriers ChAFTA has removed, dipping your toes into a sea of cultural differences would probably have stopped you right in your tracks. All this before we even consider the language barrier, but those projected figures for 2016 are hard to ignore.

The FTA has made it possible for Australian companies to take advantage of this economic growth in China and to offer their products and services to a growing market with very little risk. Not only that, but Chinese consumers and business owners are increasingly open to goods and services provided by Western companies. They are looking for a particular level of service and quality that they feel is not always available in the local market. As such, they have turned to Western companies in their search for high-quality products and services – this is where you and your business step in.

Advantages of expansion into the Chinese Market:

  • Significant Financial Gain – Increased internet access and more expendable income available to the average consumer has seen the e-commerce market in China grow at breakneck speed. In fact, China’s most popular search engine, Baidu, made US$5.12bn in internet sales advertising revenue in 2013, and that figure looks set to grow for years to come. Analysts have also calculated that for every US$10 spent on the internet in the Asia Pacific region, US$6 came from China. It’s a huge market and now is the time to get involved.
    Baidu
  • Massive Growth Potential – The fact that six billion search requests are handled by Baidu each day gives you an idea of the exposure your company can get in China. With proper marketing and, of course, an appealing product or service, your business could enjoy growth that would be impossible in the local Australian market.
  • Partnership Building PotentialBuilding a partnership with a trusted local firm could benefit both companies greatly as they look to expand into each other’s markets. This could lead to higher sales of your products and services due to your new partner’s understanding of the local market. 

Obstacles businesses may encounter as a result of the FTA include:

  • The Language Barrier – It might seem an obvious one, but with more businesses in China employing English-speaking staff to deal with overseas partners, it may not be the barrier it once was. Baidu requires all ads to be placed in simplified Chinese, which is advisable for any Australian business entering this market.
  • The Cultural DifferenceMaking your products or services appeal to the Chinese market may require some subtle changes to how they are marketed. There was a time when local knowledge (and possibly a local agent) was essential, but thanks to the FTA, Australian agencies are now able to guide your digital business through this veritable minefield.
  • Search Engine Optimisation (SEO)Chinese SEO might be a little intimidating for a business owner that’s new to the market. Fortunately, China’s biggest search engine, Baidu, has said that they are more than willing to provide analytics to Australian businesses and give them access to targeted search engine advertising. Not sure if you’re ready to tackle this particular task? Get in touch with Croud Australia – we’re ready and raring to go!
  • Rules and RegulationsLaws regarding the sale of goods and services vary a great deal from country to country and dealing with Chinese regulations may not be the most appealing of prospects. However, this is another area that local Australian digital agencies are now allowed to guide you through since the FTA was signed. 
  • Pricing Issues – Chinese consumers are notoriously good bargain hunters, so you may have to adjust your pricing accordingly to appeal to the thriftiness of your target market.

 

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It may seem that there are a few more obstacles standing in your way than there are advantages, but if you’ve been paying attention, you’ll see that the majority of these stumbling blocks are easily overcome. Certainly, making the decision to get your business involved in the Chinese market is not to be taken lightly, nor is it a potential for growth and financial gain that can be dismissed out-of-hand.

Simply put, the Chinese market is like a candy shop filled to the brim with all sorts of goodies, and we Australians have been given the keys. It would be a shame not to have a little nibble, wouldn’t it?

If you are interested in taking your digital offerings to the Chinese market, but are unsure of which approach you should take, please contact Croud and let us put your business on the right track.