September 7, 2021

China: The Opportunities and Considerations in the World’s Second-Largest Economy

Written by German Accelerator

The thoughts of any company considering international expansion will at some point inevitably turn towards China. Being the world’s second-largest economy – and predicted to be the largest by 2028 – along with a fast-growing and affluent middle class, make China an attractive proposition.

But the perceived complexity of doing business in China may put some companies off a deeper investigation of its potential. This is a shame, as with proper planning and consideration, it represents a potentially outstanding opportunity for German businesses.

Transforming From “The World’s Factory” to a Consumption-Driven Economy

It’s no secret that China’s economic growth over the past few decades has been based on its position as a global center of manufacturing: our homes and businesses include several “Made in China” products.

A direct outcome of this economic growth is the increasing affluence of many of China’s 1.4 billion citizens. Its middle class population is predicted to number more than half a billion by 2022 – one and a half times that of the U.S.’s – with 75% of China’s urban consumers being upper middle class.

China is rapidly transforming from “the world’s factory” to a consumption-driven economy. With a population looking for products and services that reflect their status, lifestyle, and aspirations, this presents numerous growth opportunities.

Opportunities in the Chinese Market for German Businesses

When looking at the country’s economic transformation and key priorities through the lens of German business expertise, we see four primary areas of opportunity:

Icon AgriTech AgriTech: China is home to 20% of the world’s population, but it only has 7% of the planet’s farmlands, with a yield efficiency far lower than the global average. While the country is self-sufficient for certain crops, it relies heavily on soybeans, milk, and sugar imports; hence AgriTech is critical to increasing the efficiency and diversity of China’s farming.
Icon CleanTech CleanTech: While China has long been criticized as one of the world’s biggest polluters, it also has the largest renewable energy capacity and consumption globally. It produces 70% of photovoltaic panels, 50% of electric cars, and 50% of wind power capacity utilized globally. Nearly a quarter of China’s total energy consumption is from renewable sources, and the government has committed to carbon neutrality by 2060. An estimated US$2 trillion has already been invested in clean technologies in China.
Icon HealthTech HealthTech: The sheer size of China’s population makes efficient delivery of healthcare a challenge, and its aging population spread across vast rural areas significantly adds to the increasing healthcare costs. Its national ‘Healthy China 2030’ strategy aims to employ cloud computing, the Internet of Medical Things (IoMT), and data analytics to transform healthcare and encourage foreign support through subsidies, tax incentives, and industry compliance support.
Icon Smart Manufacturing Smart Manufacturing: Though China is fast becoming a consumption-driven economy, manufacturing remains the country’s largest sector and will grow alongside increased consumer spending. Although its manufacturers are being challenged by emerging, lower-cost manufacturing countries, the ‘Made in China’ strategy (MIC25) aims to utilize smart manufacturing technologies to maintain its manufacturing prowess.

Navigating China’s Complexities

China can seem impenetrable to many foreign businesses due to its complex business culture, industry structures, laws, and regulations, but German Accelerator’s China offering lends a helping hand to German companies keen to navigate this market.

Program Director Petrina Seah explains the structure of the recently-launched offering: “While many are aware of the opportunity the Chinese market represents, we also understand that to many startups, China can look like an intimidating place to do business. Our new China offering enables German startups to tap into and maneuver this complex market.

Quote from the text about the china market by Petrina Seah

The offering’s holistic approach gives participants the opportunity to develop a comprehensive understanding of whether an expansion into China is a viable option. The China Essentials workshop covers the business and political essentials, while the China Market Discovery program deep dives into assessing the business’s market suitability. Participants will gain access to experienced partners in both Germany and China, understand how they could adapt their business model for China, and get feedback and frameworks regarding their suitability for expansion into the market.”

The three-day China Essentials workshop gives German startups a chance to establish whether China represents a viable growth opportunity. It covers political and economic essentials, opportunities and challenges for overseas startups and small- and mid-size enterprises (SMEs), and insights on legal issues and intellectual property (IP) rights.

For those startups who successfully proceed to the next step, the eight-week China Market Discovery program delves deeper into assessing the product-market fit through in-depth sessions and meetings with local businesses and potential partners. It also provides individual coaching and guidance from dedicated market experts during one-on-one mentoring sessions. At the end of the program, startups receive detailed feedback on their business readiness to guide market entry plans.

Currently, the offering is delivered online, though it will include face-to-face meetings and in-market visits when circumstances allow.

The First China Market Discovery Participants

Six high-potential German startups have joined the first China Market Discovery Program, including:

6 Startups from the China Market Discovery Class 2021-1

  • Actindo AG – offering a hybrid solution of ERP, MDM, PIM and complex channel and logistics management modules to enable easy and efficient handling of business processes.
  • Cynteract – developing a smart glove to trace and control hand movements. Connected with a VR-Headset, it rehabilitates hand injuries through motivational games in the virtual world.
  • Mecorad – offering customers producing hot-rolled steel and metals higher product quality at lower production costs by using a radar-based plant digitalization solution.
  • Senorics – delivering unique solutions with its NIR-spectroscopy chip for a multitude of measurement and detection problems in industrial applications.
  • Siqens – focusing on a fuel that can be produced from various forms of biomass and thus independent from fossil fuels. Siqens wants to replace diesel generators with its fuel cells, thus making the off-grid energy supply of the future sustainable.
  • URGROW – providing a smart, modular, and efficient urban gardening system for homes. URGROW has a 3-step approach to get to the personalized cultivation areas in fully automated, vertical farms.

Shangqing Wang from Senorics explains why participation in German Accelerator’s China Market Discovery program was attractive to the company: “We believe that China is the market to take our technology to the next level, given how its industries and consumers have a strong willingness to adapt new technology and welcome digitalization. Through German Accelerator’s China Market Discovery program, we hope to better understand the Chinese business culture, find a China-specific strategy, and gain a more hands-on market experience.”

Ready to Consider China?

The perceived complexities of China can appear overwhelming, but the potential opportunities for those who take a structured approach to review the suitability of their business to China (and vice versa) can be huge.

If you’re ready to start the journey of assessing whether China could be a market that offers valuable opportunities, the free China Essentials workshop is a great place to start – find out more here.