What Challenges?

Most U.S. small businesses are not tapping into the market

The numbers tell us that Small- and medium-sized businesses (SMEs) should be exporting, and many are doing so like never before, but many more or not involved in exporting at all.

The demand for imported consumer goods in China is greater than the supply. These imported consumer goods include imported foods, daily necessities, home decoration accessories, handcrafts, electronic and luxury products. 

Often small businesses do not have the resources to tap into this market.

U.S. Lagging Behind

Despite substantial growth in US exports to China, the US share of PRC imports has fallen over the past decade to 7 percent in 2012. In 2003, the United States held more than 8 percent of PRC imports and 10 percent in 2000. 

The European Union far outpaced the U.S.

The European Union, Japan, and South Korea each export more goods to China than the United States. While the United States in 2012 surpassed Taiwan in terms of imports to China, it remains significantly behind other international competitors.  

China acts as a primary processing area in East Asian supply chains routed through Japan, South Korea, and Taiwan, in part accounting for strong imports from those countries. However, China’s imports from the EU far outpace those from the United States and should be used as a benchmark to compare export competitiveness in China. (e)

Obstacles Cited by SMEs

SMEs cite many obstacles – both foreign and domestic – and unique challenges to doing business in China. These include an increasingly competitive environment, human resources constraints that limit their ability to recruit, hire and retain necessary talent and their ability to “find the right customers.”  These challenges are amplified by a lack of resources to address such obstacles, a lack of knowledge about the China market, limited staff resources and fewer internal accounting, legal and government relations resources compared to larger multinationals. SMEs face additional functional challenges such as acquiring export financing or other capital needs to complete orders, and generating overseas sales leads.

 

(e) Source: US China Buisness Council
 (f) Source: 
AmCham Shanghai’s 2012 SME Challenges Survey 

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The Problem - Solution - and Opportunity

Some obstacles most likely to trip up U.S. SMEs when doing business in China. These range from day-to-day challenges like:

  • Unclear regulatory environment,
  • Cultural challenges including language & customs;
  • Human resource constraints;
  • Lack of capital;
  • Market access limitations;
  • Legal system tilted in favor of local Chinese companies;
  • Overseas competition, especially SMEs from Germany, Europe and Asia, which enjoy well-funded government programs from their home government;
  • Highly competitive and increasingly challenging domestic market in China amplifies the uncertainty SMEs face when doing business overseas, often for the first time. (f)