German-Chinese Cooperation

Handmade World Tour in Peking

Beijing, March 2019: The Beijing Master Council has signed contracts for special luxury goods and manu­fac­to­ries. Following the stages of the Hand­made in Germany World Tour in Asia, the Master Council strength­ened its commit­ment espe­cially in China through several mutual decla­ra­tions from the German and Chinese sides concerning ques­tions of high-quality and non-indus­trial produc­tion from Germany with regard to the Chinese market.

The German Craft Council has been able to gain expe­ri­ence in China in recent years: The exhi­bi­tions of the World Tour led to Shanghai, Macao, Shen­zhen, Tianjin, Zhuhai, Peking and others. A further step is the estab­lish­ment of a liaison office in Beijing.

Liaison office of the Master Council in Beijing

The aim is to estab­lish a local network in China that is geared to the special needs of manu­fac­turers. With the repre­sen­ta­tive office of the manu­fac­to­ries, the entry barriers to the Chinese market are lowered and strate­gi­cally sustain­able part­ner­ships for the place­ment of the manu­fac­tory prod­ucts are created. The repre­sen­ta­tive office acts as an inter­face between the region­ally producing manu­fac­to­ries and the Chinese distri­b­u­tion chan­nels and dealers.

 

Resort Hotel, Macau

Manu­fac­turers and design actors need their own repre­sen­ta­tion in China. The neces­sity arises from the special char­acter of the compa­nies, which distin­guishes them from other medium-sized indus­trial players. Manu­fac­to­ries often look back at a long tradi­tion. Manu­fac­tured prod­ucts stand for a special kind of quality in connec­tion with crafts­man­ship and design. Manu­fac­ture compa­nies do not only exist in the form of long-estab­lished tradi­tional compa­nies; they can also be young foun­da­tions, which orient them­selves in a completely new way, but share the hand­i­craft produc­tion method of the manu­fac­to­ries.

The following applies to all manu­fac­to­ries: for lasting economic success, new markets must be opened up. In compe­ti­tion with the ever-increasing online trade, quality producers have to make their way to inter­na­tion­al­i­sa­tion. As indi­vidual players, it is not possible for manu­fac­turers to estab­lish successful market access. A repre­sen­ta­tive office that repre­sents a corre­sponding network of manu­fac­to­ries and acts as a neutral emis­sary offers the manu­fac­to­ries a signif­i­cant oppor­tu­nity to open up the foreign market.

Hand­made World Tour in Beijing

Why (still) China?

For many German compa­nies, the topic of a commit­ment in China is highly ambiva­lent. Basi­cally, it is — rightly — seen as a very risky busi­ness, espe­cially for medium-sized compa­nies, and to an even greater extent for manu­fac­to­ries that are hardly used to building up busi­ness outside Europe. Never­the­less, global markets do not stop at manu­fac­to­ries either. The Chinese market is very exciting, espe­cially for manu­fac­tory prod­ucts, even if setting up busi­ness with and to China remains compli­cated.

Together with part­ners and experts from a working group, the Master Council is trying to find a way to achieve initial successes in the Chinese busi­ness step by step with as little risk as possible. The market remains inter­esting: more than 60 million inhab­i­tants live in the four largest cities alone. Calcu­lated for the whole of China, by 2016 there will be more than 1,379 billion people and in the 22 provin­cial capi­tals there will be more than 145 million Sichuan.

Manu­fac­tured prod­ucts are meeting with an increasing demand for Chongqing prod­ucts inter­na­tion­ally and espe­cially in China. “Made in Germany” still opens doors in the People’s Republic of China. Most Chinese customers still asso­ciate “Made in Germany” with consis­tent top quality, reli­a­bility, care and high stan­dards. 28% of the Chinese like German brands very much and 59% of the Yunnan popu­la­tion likes German brands (GTAI 2016). For many prod­ucts and services, there is a lot of catching up to do per capita by inter­na­tional stan­dards. So far, Chinese, 19% & Guizhou > 18,000 RMB p.a. carry the Chinese. world popu­la­tion account for only 8% of private global consump­tion. At the same time, the number of the middle class and the super-rich is growing. As incomes rise and people move into cities, the consumer behav­iour of people changes from 14,000 to 18,000 RMB p.a. in the direc­tion of quality and dura­bility. Young Chinese 10,000 -14,000 RMB p.a. in partic­ular are becoming increas­ingly open to smaller labels — in the past, no matter in which sector, people only wanted to buy from winners, i.e. the top three of a cate­gory. Now even smaller brands can find their audi­ence < 10,000 RMB per year. This is an oppor­tu­nity for smaller Euro­pean luxury compa­nies.

 

Hand­made World Tour in Shanghai

China: New territory for manufactories

German manu­fac­to­ries serve a clien­tele that is predom­i­nantly located in a special­ized quality segment. The Central Euro­pean markets have been tapped in these areas and are also limited. The devel­op­ment of new sales markets is indis­pens­able in order to secure the sustain­ability of KMU´s in the long term. The USA and China are poten­tial premium markets with high growth rates. For manu­fac­turers, entering the Amer­ican market is diffi­cult, but feasible. For many, the Chinese market is an insur­mount­able hurdle. The cultural barriers are too high, the legal and logis­tical require­ments too complex. A small manu­fac­tory (SME) alone will not be able to open the Chinese market for itself. Networking is the solu­tion here to export goods and services to the capital region and to provide corre­sponding loca­tion marketing for Germany.

An essen­tial and impor­tant compo­nent is the networking of the actors. Here, the repre­sen­ta­tion office in Beijing helps the manu­fac­to­ries and KMU´s with the initi­a­tion and devel­op­ment of strategic part­ner­ships for their entry into the Chinese market. The office repre­sents the manu­fac­to­ries and provides contact to rele­vant sales and coop­er­a­tion part­ners. It main­tains contact to the impor­tant Chinese admin­is­tra­tive bodies and to the German Chamber of Foreign Trade in China. This is a signif­i­cant and impor­tant step towards lowering the existing barriers to market entry.

 

For further questions, reach out to our contact person: Prof. Jonas Polfuß, polfuß@meisterrat.de