Legal opinion on the import of particular products/services to China - 587USD
- Regulatory framework for the import of a particular product/opening of production/provision of services
- Key suppliers and market participants
- Market capacity
- Key consumers
- Analysis and statistics of price levels
- Dynamics and projected growth
- Recommendations and brief action plan
- Risks and insurance against them.
Execution of documents to receive a quota - USD489 (excluding state duties and charges)
According to the government data, in 2009 import to China amounted to $956 billion; while in 2012 it amounted to $1.82 trillion increasing by $75 billion or 4.3% as compared to the previous year and reaching a new historical high. There is quite a strong import dependence of China preserved in production raw products and materials: wood and wood products, metals, rubber, cellulose, chemical products, primary plastics, etc. Besides, other big items of import to China are hydrocarbon resources, integrated circuits, electronic components and high-tech production lines and complexes. In 2012, the important items of import also were “wheeled vehicles” (3.9%), “plastics” and “unclassified goods” (3.8% each), “organic compounds” (3.3%), “copper” (3%), and “oilseeds” (2.1%).
For local consumers, American and European brands of any commodity groups, from smartphones to washing powders, are associated with quality. According to a survey of 2,100 consumers conducted last year by international research company Ipsos, 61% of Chinese consumers put less credit in domestic products and 28% planned to buy more imported goods. However, the reason is not only that a consumer expects imported products to have a guaranteed high quality. The key factor is a status, which is associated with foreign brands. Shaun Rein, the author of bestseller The End of Cheap China, gives an example of success story of Starbucks in China. Presently, the Celestial Empire is the second largest market of the American company. The popularity the brand enjoys is not due to coffee itself (after all, coffee is yet to win the hearts of Chinese consumers) but rather to lifestyle experience that displays a social status associated with Starbucks.
Timber and wood China is the world’s leading importer of unprocessed timber. Most part of it is used to satisfy the demands of furniture manufacturing sector. That is why an attempt to process round timber, make sawn timber from it, and supply it to PRC presents certain difficulties as sawn timber must be made under standards different from the Russian ones. Exporters of sawn timber must consider yet another issue, i.e. logistics. To be more accurate, the delivery speed and conditions. If sawn timber meant for PRC is delivered for a long time in conditions of high humidity and temperature, the color of its surface will change. For many regions of Russia it is practically inevitable especially in summer. It decreases the price of sawn timber. To prevent the annoying degradation of quality in the course of delivery, sawn timber must be treated with a special preservative. This problem is less applicable to unprocessed rough timber. However, in hot season it can also change its color.
Also, there is a demand for plywood of different grades and unprocessed railway sleepers. Surprisingly enough, disposable wooden chopsticks are also exported from Russia.
Coal China shows a stable demand for coal especially power-station baking coal. It is used in melting of ores. Coal is purchased in big batches and it is not difficult to find a market for this product. Presently, China purchases 50% of the world’s power station coal and 20-30% of the rest coal. The volume of export from Russia to China is growing every year. A major part of coal is exported through the eastern ports of Russia, although, it is shipped through almost all ports. Railway rates prevent the delivery by railway as it is less economical than the delivery by sea. A forecast for this line of business is quite favorable. The market situation is such that, unless something unexpected happens, the interest in power station coals is going to grow in the years to come. The forecast is supported with the fact that eastern sea ports of Russia are increasing their coal shipment capacities and are building new terminals.
Fuel oil. It is also purchased in big volumes as well as other products of petroleum industry including oil coke, naphtha, light diesel fuel, and lubricating oils. This product is usually delivered by sea. It shall be considered that in 2015 fuel oil export duty is to be increased to the level of oil while now it is only 66% of the latter. If it happens, the business segment’s profitability can decrease rapidly, although, the decision has not been made yet. Until 2014, Russia remained the main supplier in the Chinese fuel market. By the mid 2014, Venezuela and Singapore put competitive pressure on Russia in the market. Russia increased the rate of domestic fuel oil processing.
Secondary raw materials. This is a very promising line of business. China has long ago adopted processing and recycling aluminium cans, waste paper, and plastic bottles. In order to be exported, they need to be pelletised previously. There are small industrial complexes performing the process. Presently, the purchase and installation of such complexes is a fast-payback project. The matter is that simple pressing without preliminary breaking and pelletising results in unreasonably high delivery costs.
It shall be considered that to export secondary raw materials to China, you have to obtain an opinion of Federal Service for Supervision of Natural Resources Usage that the exported item is not hazardous wastes. If it is aluminium cans, a radiological control report is also necessary. There is an alerting trend: in 2013 China introduced a “green barrier”, i.e. increased import duty payable at the import of wastes. It was done to motivate Chinese industrialists to be more active in recycling of wastes generated in China. There was much noise about it but the business segment is still attractive.
Cellulose. Marketable cellulose is obtained after drying and pressing and has a form of gray-colored sheets. Mainly, it is sulfate cellulose. Up to 40% of Russian export of cellulose goes to China. It doesn’t make sense trying to export cellulose without passing drying and pressing as it will not reach China in marketable form.
The prospects of this line are somehow uncertain. It is due to the fact that China switches to recycling a secondary raw material - waste paper. However, this process is not fast and presently this line of business is quite profitable. More than that, despite of the above trend, the consumption of cellulose by China is growing in connection with a growth in production of paper.
Ore, first of all, iron ore. Exported to China by railway transport. In 2013, China started to purchase ore in Russia quite actively, as the global prices for its transportation by sea grew. The demand for ore in China is constantly growing as it is required for a great number of productions located in PRC. Russia has become interesting to China as a country exporting iron ore due to the alternative logistics. Lead, tungsten, antimony, titanic, and silver ores are also exported to China.
Rubber. The export of synthetic rubber is growing. China is the world’s largest consumer of it. 23.5% of all worlds’ rubber is used in China. Most probably, the deficit of raw materials for the manufacturing of rubber technical goods will remain in China for a long time, so this line of business is quite promising. In China the demand is higher for butadiene-styrene rubber, which is used in tyre production, and also, polybutadiene and polyisoprene rubbers. In September 2014, China abolished duties on export of rubber from Russia, which resulted in the increase of profitability of this line of business. In fact, duties were as high as 38% depending on the manufacturers. For Russian manufacturers they were from 4.02% to 23%.
1. Food products. The Chinese, first of all, city dwellers, give more preference to foreign manufacturers of certain groups of food products. If a product is in a section of imported goods of a supermarket, it is an extra competitive advantage for it. In this case, it doesn’t matter if it is a global brand or a product little-known even in its country of origin. Wine from France, milk from New Zealand, chocolate from Belgium has apriori advantage over the similar goods produced in the Celestial Empire. A new trend in China is organic products.
2. Infant food. This category can be pointed out as the sympathy of Chinese consumers to imported products is most noticeable in this segment. After several incidents, foreign brands are perceived by Chinese parents as guarantors of quality and safety. Melamine scandal was the greatest of them. In 2008, chemical substance melamine was found in powdered baby milk Sanlu manufactured in China, which had been probably added in order to increase the content of protein. Consumption of this product resulted in the contraction of vesical calcification in babies. 300 thousand babies suffered and, more than that, several fatal cases were registered. After that, there were some other cases when harmful substances were found in infant foods manufactured by Chinese companies. The confidence of people in local manufacturers was shattered. Now, Chinese tourists coming to Hong Kong, Macao, or Taiwan empty out the shelves of the stores with imported powdered baby milk. The government of Hong Kong has even set a limit on the removal of powdered baby milk to Mainland China. At the same time, local manufacturers drop broad hints to the foreign origin of their products. Chinese producer of infant formulas Yashili has even decided to open a factory in New Zealand. Nowadays, about 80% of a market of infant food is taken by foreign brands. There are about a hundred of them in China. The products of some domestic companies, e.g., Boistime, Scient, and Ausnutria are actually positioned as being of foreign origin, which works fine. Speaking about the local market of infant food, it shall be noted that it is the second largest in the world after the market of the USA. According to the statistics, 16-18 million babies are born in China every year and the number of children aged up to three is more than 70 million. The volume of sales of infant food in the Celestial Empire grows by 10% annually, which is further promoted by urbanisation and the growth of income of people. In 2012, China faced a baby boom as it is believed that babies born in the year of the Dragon are going to be happy and successful. That is why the local market is provided with end consumers for several years to come.
3. Wine. The influence of western culture on the habits of local consumers and the growth of average income level promote the popularity of wine in the Celestial Empire as an elite drink. In the last few years, the PRC wine market growth rate amounted to 20%. At the same time, the share of foreign winemaking companies in China practically doubled in the last 4 years amounting to about 15% now. The number of consumers of imported wine in the country is 20 million people. The figure seems considerable; however, actually it is only 1.5% of the country’s population. The potential of the market is much higher. According to the forecasts by experts, by 2020 the number of consumers will increase to 80 million people. Exporters and trade companies shall be prepared to potential sharpening of competition. Presently, the market of wine products is dominated by the producers of the “big six” including France, Italy, Spain, Australia, Chile, and the USA. They account for 90% of all imported wine in the country. Also, it shall be considered that the market of wine in China is quite young. The traditions and culture of wine consumption are being formed, although, it is already possible to distinguish some preferences of the buyers. Here is a real example: a businessman came to Guangzhou to sell Georgian wine in China but immediately discovered that neither buyers nor distribution networks were interested in it; it turned out that some Chinese didn’t know the name of the country of wine origin. For the most part of local population wine is associated with France; as a minimum, with Europe. The businessman decided to change the labels and the name of the wine on site to add “French chic” to his product. At some point, importers of wine from the South Africa faced a similar problem but managed to win a certain segment of the local market due to a good marketing strategy. Presently, they have a share of about 3%, which is to grow by the projections of experts.
4. Jewellery. As of the end of 2011, the annual volume of sales of jewellery in China exceeded 300 billion yuans increasing by 2.4 times as compared to 88 billion in 2000. The most popular precious metals are gold and platinum. China is the world’s second largest consumer of gold jewellery after India and the world’s largest consumer of platinum jewellery. In 2011, the volume of consumption of jewellery amounted to 456.7 thousand tons of gold and 52.4 tons of platinum equalling 68.3% of the total global volume. As reported by the China Gold Association, in 2012 the consumption of gold jewellery in the country grew by 10.09% year-on-year to 502.75 thousand tons. At the same time, the consumption for industrial purposes decreased. Market analysts also note that recently the popularity of diamond jewellery has been growing mainly because of its investment attractiveness and wedding fashion.
5. Luxury goods. Even in the period of recession in the global market in 2009, the sales in Mainland China grew to 64 billion yuans by 12-16% (according to different data) as compared to 2008. The growth rates were less than in 2008 (20%) but much more than in many western countries. In the period since 2008 through 2011, the market of luxury goods of Mainland China almost doubled from $20.2 billion to $48 billion. According to consulting company Bain & Co., China accounts for about 25% of all global sales of luxury goods. It is interesting that men are in the majority among the consumers of fancy goods and luxury goods. According to CLSA agency, they account for not less than 55% of the market, which is much higher than the average global figure of 40%. Analysts note that an average rich man in China is younger than one from Europe or the USA. It is due to the country’s demography. The sales of men’s clothes Burberry in China grew by more than 50% in the last quarter of 2012 and the sales of men’s accessories grew by 40%. “We are sure in the prospects of growth in the Chinese market”, - says Burberry financial director Stacey Cartwright. However, it shall be considered that the Chinese often prefer to buy luxury goods and expensive items abroad. Due to high rates of many imported goods (up to 60% of the initial price), foreign brands, especially luxurious ones, are eventually overpriced.
6. Raw materials and chemistry. Perhaps, this item should be the first in the list of most popular lines of Russian export to the Celestial Empire. Oil, gas, coal, wood, and other natural resources are the most obvious answer to the question: “What shall I export to China from Russia?” It is also confirmed with the official statistics of Federal Customs Service. This sphere is certainly strictly quoted and controlled by authorities and big players both in Russia and PRC. However, the Chinese import of raw materials is not limited with oil and wood and remains one of the most promising lines for small and medium business.
Coal, scrap iron, polycrystalline and monocrystalline silicon, tremolite, precious and semi-precious stones, amber, various fertilisers, animal skins (mink, otter, fox are in great demand), carcasses of wolves, chocolate, spice cakes, and medicines make up an incomplete list of goods China is interested in.
Quality food products: vegetable and animal oils, milk products, groceries, confectionery products, juices and organic preserves, alcoholic beverages, luxury goods: paintings, jewellery, and interior pieces of art.