China’s large economy and a plethora of business opportunities make it an attractive market for many entrepreneurs. With a vast population of potential customers, China provides a ready market for new companies.
One important decision that companies must make is deciding where to launch their new business.
The common school of thought for Americans looking to break into the Chinese market is to target China’s four Tier 1 cities: Beijing, Shanghai, Guangzhou and Shenzhen. These cities provide many of the market features entrepreneurs look for:
- Highly populated
- Large middle-class community
- Income levels exceeding the national average
- Familiarity with foreign products
While these cities are good options for successfully launching a new business, there can be challenges. New companies will face not only high start-up and operating costs but also more competition.
China’s Tier 2 cities have had notable economic growth, and the citizens there are enjoying rising income levels. This increase in consumer spending power is fueling high demand for foreign products.
Tier 2 cities such as Wuhan, Nanjing and Xi’an have lower setup costs, lower ongoing operating costs and far less competition than their Tier 1 counterparts, making these markets very attractive for new businesses. Additionally, the advantage of being an early adopter of these markets can position a company well for long-term success.
Ultimately, the decision will depend on a number of factors requiring extensive market and product research. Concerns such as supply chains, transportation options and manufacturing capabilities all may play a role. Launching a business in China can be a path to success with the right research and strategy.